Los Angeles, CA (PRWEB) January 31, 2013
The $12.7 billion Institutional Pharmacies industry was resilient during the recession, though it has experienced declines during the past couple years due to declining Medicare and insurance reimbursement rates. Revenue is expected to fall 7.6% from 2012 to 2013. “Recent healthcare reform via the Affordable Care Act changed the upper price limit that an insurers or health plans can reimburse for generically available or multiple source medications,” says IBISWorld industry analyst Nima Samadi. Generic drugs have accounted for a larger portion of prescriptions filled over the past five years, which has slowed growth and reduced industry revenue. Notably, the industry's high dependency on Medicare reimbursements has raised concerns about long-term profitability and stability.
Over the five years to 2013, IBISWorld estimates revenue will decline at an average annual rate of 1.8%. Nevertheless, demand for institutional pharmacies has grown as a result of increased public and private health spending and demographic shifts. These trends are projected to continue during the five years to 2018, with strong average growth. The US economic downturn did little to deter hospitals, long term care facilities and other customers from increasingly relying on institutional pharmacies. The aging US population is a major factor driving demand, as the occurrence of health issues that require hospitalization and long-term care is higher in the elderly population. According to Samadi, this demographic is forecast to expand as a percentage of the total population during the five years to 2018, which will help maintain industry growth. Two goliaths, Omnicare Inc. and PharMerica Corporation, dominate the Institutional Pharmacies industry. In 2013, these two companies alone will account for nearly half of industry revenue. Over the five years to 2013, the number of industry operators is expected to decrease at an average annual rate of 2.9% to 1,579 companies. This decline illustrates the trend toward consolidation. Institutional pharmacies are also focusing on nontraditional revenue streams, such as clinical services, to drive further growth. These activities tend to be high margin and somewhat insulate the industry from variability in revenue and profit levels due to changes in prescription drug reimbursement rates.
The Institutional Pharmacies industry has a medium level of concentration with the two-largest players accounting for an estimated 47.9% of industry revenue. The remaining 52.1% of the industry is highly fragmented, with the third-largest industry player accounting for only about 2.0% of industry revenue. As firms in the industry continue to consolidate operations over the next five years, industry concentration is expected to increase. However, the industry will always likely remain at a moderately concentrated level due to regulator antitrust concerns. For example, Omnicare's 2011 attempt to require rival PharMerica was blocked by the Federal Trade Commission over concerns that the combined firm would have too much bargaining power when negotiating reimbursement rates with Medicare Part D sponsors. For more information, visit IBISWorld’s Institutional Pharmacies in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes pharmacies that provide a range of services to residents of nursing homes, hospitals or hospice environments that do not have an on-site pharmacy. In addition to providing pharmaceuticals, institutional pharmacies provide consulting services, which include monitoring the control, distribution and administration of drugs and assisting in compliance with regulations.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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