Liberty Medical liberates itself

PORT ST. LUCIE, Fla. - It may have come as a shock to many when Liberty Medical in December exited the Medicare fee-for-service diabetes supply business, but there was some behind-the-scenes movement leading up to that decision.

In December, a group of Liberty executives bought the company from its parent company, pharmacy benefit giant Express Scripts, which inherited Liberty as part of a $29 billion merger with Medco Health Solutions. From the get-go, Express Scripts made it clear that it had no plans to get ensnarled in competitive bidding, says M&A analyst Kevin Palamara.

“I would imagine that Express did a thorough review and marketing of the business and found, given the uncertainty around national competitive bidding, that valuations are quite low,”said Palamara, a managing director with Provident Healthcare Partners.

One of the first moves Liberty's new ownership made: laying off about 450 employees and selling the Medicare fee-for-service diabetes supply business to Coral Springs, Fla.-based Arriva Medical, according to news reports.

Liberty's loss could be Arriva's gain. Arriva rolled up several mail order providers in 2012, including Direct Diabetic Source in January and AmMed Direct in February. More recently, it acquired the diabetes supply business of NationsHealth, which analysts believe has between 75,000 and 100,000 active patients.

“You've got to be big to survive in that market,” said Bob Leonard, an analyst with The Braff Group. “You've got to have scale, but a lot of segments are like that now.”

Liberty plans to remain in the Medicare Advantage program and also focus on the commercial diabetes market, including insulin pumps. The provider also offers urological and ostomy supplies, and operates a mail-order pharmacy. HME

[See also: Big program shakes up diabetes market]