The growing pharmacy chain and PBM picked up Premier's specialty pharmacy business for $22.5 million, plus up to $20 million for inventory.
Premier Inc. said this week that it's ejecting its specialty pharmacy operation in a deal that means more customers for CVS Health.
Premier currently serves 367 hospitals sprinkled across 66 health systems, through its Acro Pharmaceutical Services and Commcare Pharmacy assets. Those customers will be transitioned to CVS subsidiary ProCare Pharmacy LLC in a deal expected to close by the end of next month, Premier said.
Premier valued the sale at $22.5 million, plus up to $20 million more for inventory. Exiting the specialty pharmacy business will translate into a $87-92 million non-cash impairment charge for Premier, the company said. Carrying out the transaction will also cost another $11-15 million in fees and benefits.
"Although specialty pharmacy continues to be an important component in healthcare, today's market dynamics are challenging and have resulted in new pressures across the industry," Premier President Michael Alkire said in a statement. "Exiting the business better positions Premier to capitalize on our strengths and enhance our focus on core, growing business lines encompassing our supply chain, enterprise analytics and performance improvement capabilities."
Premier said its adjusted margin should rise to about 45%, from 34%, after the transaction, while reducing annual consolidated net revenue by about $470 million and increasing annual pre-tax income by about $6 million.
While the company saw growing revenue from net administrative fees, that increase was offset by compression in the specialty pharmacy business and increases in product-related costs, Premier said in its third-quarter earnings data released Tuesday. The company's third-quarter adjusted earnings from the supply chain services segment fell slightly to $133.7 million, from $135.3 million a year prior.
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Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.
KEY TAKEAWAYS
Premier is exiting the specialty pharmacy business amid 'challenging' market dynamics.
Customers of two Premier subsidiaries will transition to a CVS subsidiary.