A Vancouver-based pharmacy provider that serves homebound and assisted living facility patients has been sold to an Alaska-based provider of similar services. The new corporate owners say they intend to more than double the number of employees in Vancouver, making it the company’s hub for operations in the U.S. mainland.
CHS Pharmacy and its subsidiary Kirk’s Drugs are now owned by Geneva Woods Pharmacy, Inc. based in Anchorage, under a deal that closed this week. CHS is a provider of long-term care pharmacy, home medical equipment and supplies, and rehabilitation and respiratory services in Washington, Oregon, Idaho, Colorado and Nevada. It has nearly 100 employees, including 60 in Vancouver and the remainder in Lacey, Olympia and Spokane. Terms of the deal were not disclosed.
The transaction is representative of an industrywide consolidation now underway in the so-called “closed door” non-retail pharmacy sector, according to the owners of both companies. The consolidation is driven by growing government involvement in funding medical supplies and drugs, and as a regulator of the industry’s practices and pricing, they said.
James Waletich, chief executive officer of CHS Pharmacy, said that smaller pharmaceutical services are having difficulty competing in the face of rising government paperwork and shrinking reimbursements.
Waletich, who is 69, said he had not wanted to sell but decided it made no financial sense to continue as a small independent company. “I didn’t really have a choice because I really would have had to get bigger and get more investors,” said Waletich, who founded the company 17 years ago. “I just felt it was in the best interests of the company.”
Dan Afrasiabi, president of Geneva Woods, said others like CHS Pharmacy face the same dilemma. “The smaller companies are trying to figure out how to survive,” said Afrasiabi. who lives in Lake Oswego, Ore. “Reimbursements continue to go down sharply. Small players don’t know where to go.”
Afrasiabi said his company’s response to the changing economic landscape is to embark on a growth strategy. Its purchase of CHS Pharmacy is the company’s eighth acquisition in the past two years. With the addition of CHS Pharmacy’s four Washington locations, Geneva Woods now has 12 locations, he said.
Geneva Woods expects to increase its Vancouver employee base as it develops the city as its hub to serve the Lower 48 states. The CHS office, 6600 N.E. 112th Court, now has about 60 employees. Afrasiabi said he expects that number to “significantly” increase. “We could see (Vancouver) employment in the 150 to 200 range” over the next 24 months.
The closed-door industry is obscure because it does not provide direct pharmaceutical services to the public in the way that a Walgreens or a neighborhood pharmacy does. Major national players are Omnicare and Pharmerica.
Geneva Woods Partners, formed 30 years ago, has specialized in providing home and specialty pharmacy services in rural markets throughout Alaska and in the Rocky Mountain region. Afrasiabi said companies like his are challenged by a squeeze on prices and increasing regulatory obligations. “It’s just rules on top of rules on top of rules,” he said. The company needs further expansion in order to achieve an optimal size, he added.
“On a regional level, we’re getting to the point where we’ll be in the $100 million revenue range,” he said. As the industry consolidation continues, “we need to get to the point of being twice that size to be a substantial company,” he said.
Waletich, a Battle Ground resident, said other companies were interested in acquiring CHS, but he says he wasn’t interested in selling to a large provider. Geneva Woods “had the same philosophy as I did,” he said. “I wanted a company that understands and practices customer service. I’ve seen what the Omnicares of the world do and was trying to avoid that situation.”
