Mark Alford is managing director at Harbor Healthcare Consultants of San Diego. Mark’s work as a merger and acquisition professional, specializing in LTC pharmacy, gives him some insights he is willing to share. Here’s Mark:

LTC pharmacy M&A is in the early stages of a renewed acquisition cycle. Over the past several years, strategic acquirers have focused on internal mandates and other priorities, effectively retreating from M&A activity and creating a buyer void. As a result, the door has opened for new phenotypes of LTC buyers, including independent operators, private equity firms, hybrids and new public entities. These new players bring exciting opportunities for sellers, including improved valuations and market synergies.

In tandem with these emerging buyer types, innovative niche service models in the LTC segment have evolved—models that historically fell outside the scope of traditional institutional pharmacy. For example, LTC-at-home has grown in both popularity and sustainability, largely due to the lasting impacts of the pandemic. Similarly, behavioral health pharmacy has moved into the spotlight as awareness increases and state governments address community mental health challenges.

All of these dynamics are creating new metrics for evaluating LTC pharmacies in proposed transactions or partnerships. The opportunities and risks in today’s landscape differ markedly from those of three years ago. Reimbursement has always been a key consideration, but the Inflation Reduction Act has added a new layer of complexity. Whereas several years ago there may have been only a handful of buyers for a particular LTC pharmacy, today that roster may be double in size—improving valuations and expanding seller options. LTC pharmacies that maintain attractive customer contracts, are relatively insulated from attrition, have a diverse customer base, and perhaps operate across multiple states tend to attract the most qualified suitors. Building a resilient LTC pharmacy with strong, legacy-based customer relationships can be extremely challenging—especially while maintaining profitability. Yet this is precisely why buyers are willing to pay a premium for enterprises that fit this profile.