CONFIDENTIAL

NOVEMBER 2009

INDUSTRY RESEARCH

Hospital Pharmacy

HOSPITAL PHARMACY PIECE

Table of Contents

HOSPITAL PHARMACY PIECE

Hospital Pharmacy Overview

GENERAL HOSPITAL OUTSOURCING PIECE

HOSPITAL PHARMACY OVERVIEW

Hospital Pharmacy: Overview

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A hospital pharmacy is concerned with pharmacy service to all types of hospital, wherein medication-use experts (Pharmacists), based on their understanding of chemistry of drug products, advice on medication selection, administration and dosage levels The overarching goal of hospital pharmacists is to optimize patient outcomes through the judicious, safe, efficacious, appropriate and cost effective use of medicines High Performance PharmacySM project, an ongoing initiative of the Health Systems Pharmacy Executive Alliance identifies Leadership, Medication preparation and delivery, Patient care services, Medication safety, Medication use policy, Financial performance, Human Resources management and Education as eight 8 dimensions in which hospital pharmacies should strive to achieve high performance Major challenges include achieving payment for pharmacist-provided patient care, improving medication safety and quality and solving pharmacy workforce challenges Key Trends include:
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Emphasis on computerization and decentralization

Pharmacists are becoming more involved in drug therapy decision-making and patient counseling Increased use of pharmacy technicians and technology, which has improved medication-dispensing efficiency
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Rising salaries for pharmacists

Expansion in the activities performed by pharmacy technicians, reducing the amount of time pharmacists spend dispensing medications
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GENERAL HOSPITAL OUTSOURCING PIECE

HOSPITAL PHARMACY OVERVIEW

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Key Statistics

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KEY STATISTICS

Key Statistics
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As per Bureau of labor Statistics, US Deptartment of labor, Employment of pharmacists is expected to grow by 22 percent between 2006 and 2016 About 23 percent of pharmacists work in hospitals Whereas vacancy rates in the early 2000s were ~8%, the overall vacancy rate as recently as 2004 was ~ 5% The NHS Pay Review Body (NHSPRB) reported that 15 per cent of hospital pharmacists leave the NHS every year, with higher pay rates in community pharmacy cited as one of the main reasons American Society of Health Systems Pharmacists (ASHP) conducted a survey 541 US hospitals to study the impact current economic environment on Hospital pharmacy space and found 37 percent of respondents have had their staffing budgets reduced in the last six months
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10 percent of respondents have laid off personnel and 22 percent have frozen vacant positions
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66 percent of respondents have been required to reduce their drug budgets

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III Major Players

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MAJOR PLAYERS

Hospital Pharmacy Players

($ in millions)

COM PAN Y

H EADQUARTER S Houston, TX

EN TERPRISE VAL UE -

REVEN UES -

OWN ER SH IP Private
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BUSIN ESS DESCRIPTION Provides integrated contract hospital pharmacy and materials management services Provides pharmacy services to acute care hospitals and behavioral systems

Cardinal Health 109

Memphis, TN

Private

Comprehensive Pharmacy Services

Houston, TX $124 Private
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Provides hospital pharmacy management services to acute care hospitals in the United States

CompleteRx
Washington, DC Private
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D.C. Chartered Health Plan

Minneapolis, MN Private
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Provides various health care services through its network of primary care, specialty care, hospital, pharmacy, dental, and vision partners as well as through ancillary service providers Owns and operates a chain of pharmacies in the United States

Fairview Pharmacy Services

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III

MAJOR PLAYERS

Hospital Pharmacy Players

($ in millions)

(contd)

COM PAN Y

H EADQUARTER S Louisville, KY

EN TERPRISE VAL UE -

REVEN UES -

OWN ER SH IP Private
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BUSIN ESS DESCRIPTION Provides pharmaceutical and resident care products to the long-term care profession in the United States

Kindred Pharmacy Services

Las Vegas, NV Private
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Managed Care Consultants NCS Healthcare of Indiana

Indianapolis, IN Private
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Provides managed care, claims administration, case management, workers' compensation and third party administration services Offers hospital pharmacy, long term care, nursing, and assisted living facilities Engages in the discovery, development, manufacture, and marketing of prescription medicines for humans and animals worldwide Manages hospital pharmacy operations

Pleasanton, CA

$129,225

$45,818

Public

Pfizer PharmaSource Group

New York, NY Private
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GENERAL HOSPITAL OUTSOURCING PIECE

III

MAJOR PLAYERS

Hospital Pharmacy Players

($ in millions)

(contd)

COM PAN Y

H EADQUARTER S San Antonio, TX

EN TERPRISE VAL UE -

REVEN UES -

OWN ER SH IP Private
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BUSIN ESS DESCRIPTION Provides healthcare services, respiratory therapy, physical medicine, speech and language therapy, hospital pharmacy, diagnostic radiological services and nutritional counseling Provides healthcare services through Health Maintenance Organization contracts including ambulatory and inpatient physician services, hospitalization, pharmacy, dental, optical, mental health and ancillary diagnostic and therapeutic services

Southwestern Medical Centers

Heathrow, FL

$91

Public

SunStar Healthcare

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IV Recent Update

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IV

RECENT NEWS

Recent Updates
RECEN T N EWS
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July 11, 2009: Government rejected calls to offer bonuses to hospital pharmacists in an attempt to stem the tide of those moving to the community sector March 27, 2009: Bureau of Health Professions reported Whereas vacancy rates in the early 2000s were 8% or higher, the overall rate as recently as 2004 was about 5%, indicating that shortage of pharmacists in the work force has eased in recent years December 9, 2008: Craneware announced the release of Pharmacy ChargeLink version 2, a software application that allows hospitals to capture revenue they are currently missing due to absent, incomplete or incorrect pharmacy data in their billing systems August 31, 2008: Global Conference on the Future of Hospital Pharmacy was hosted by the Hospital Pharmacy Section of the International Pharmaceutical Federation (FIP), wherein Delegates from 86 countries on August 31 approved 74 consensus statements in Basel, Switzerland
M&A TRANSACTIONS OF THE INDUSTRY

ANN. DATE

ACQUIROR

TARGET

TARGET'S BUSINESS DESCRIPTION

DEAL VALUE

LTM LTM SALES EBITDA

EBIT

NA 30-Jun-09 Comprehensive Pharmacy Services RemoteSolutions

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NA NA

NA NA

NA NA

Offers retail and wholesale pharmacy services to public and private hospitals as well as government and institutional facilities

NA

15-Jul-09 30-Apr-08

Netsmart Technologies Comprehensive Pharmacy Services

Crown Software McKesson Medication Management

NA Provides supply, information, and care management products and services for the healthcare industry Provides managed care, claims NA

NA NA

NA NA

NA NA

20-Jul-05 6

CIGNA Health

Managed Care

NA

NA

NA

NA

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IV

RECENT NEWS

Consultants

administration, case management, workers' compensation and third party administration services
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24-Sep-97 NCS HealthCare

PharmaSource Group

Manages hospital pharmacy operations

NA

NA

NA

NA