Option Care buys $17M home infusion pharmacy

Saturday, August 31, 2002

BUFFALO, Ill. — Option Care's July acquisition of a $17-million home infusion pharmacy in Minneapolis is the largest in a string of acquisitions the company has made in the past year and a half.

Raj Rai, Option Care's president and CEO, said the acquisition of Allina Hospitals & Clinics' home infusion pharmacy translates into 1,500 new patients for the company. The acquisition is the fourth time in 18 months that Option Care has take over a hospital's home infusion pharmacy.

"[Hospitals] are one of our targets," Rai said. "It's good to establish a relationship with large hospital systems. It gives you some security in getting patients. Patients are always given a choice, but it's a solid referral base."

Industry analysts aren't surprised by the recent string of Option Care acquisitions. They say the company has had its way with the home infusion market in the past few years. With few national players and a reputation for complex billing and poor reimbursement, the company has been left nearly alone to pick from a pool of thousands of independent, mom-and-pop providers.

Option Care's timing is also good, industry analysts said. The home infusion market is beginning to recover from the shake out of the mid-1990s, when managed care companies slashed their reimbursement rates because they had crept up so high.

"Reimbursement for home infusion has been working on a pendulum," said one industry analyst. "It had been maxed out, but now it's swinging back to the center, to a more sane level of reimbursement."

Industry analysts say the recent string of Option Care acquisitions also means the company's shifting its focus away from franchising.

"They're still franchising, but they're no longer looking to grow that aspect of the business," said one industry source. "Who can blame them? Franchises are heard to deal with."

Option Care's recent growth has helped boost the company's books. Option Care recently reported stellar earnings; revenues were up 51% to $75.5 million in the second quarter from $49.9 million for the same period in 2001.

There should be more good news ahead. Industry analysts predict that while the traditional home infusion market will remain even-keel, the specialty pharmacy side of the market (medications for chronic populations) is primed to explode. Option Care has a hand in both: 44% in the former, 56% in the latter. Rai said the company's looking to grow its specialty pharmacy side of the market by 20-30% each year.

Option Care operates in 32 states and had revenues of $215 million in 2001. HME