US Oncology Taking On Drug Distribution Role
Executive Summary
Cancer services company US Oncology is building its own drug distribution capacity to serve medical practices in its oncology network
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Cancer services company US Oncology is building its own drug distribution capacity to serve medical practices in its oncology network. The company expects to integrate the purchasing, storage and distribution of nearly $1.6 bil. in pharmaceuticals for its 470 sites of service. The foray into drug distribution is designed to "reduce costs by improving waste tracking and inventory management, as well as providing operational efficiencies by decreasing paper processing," US Oncology said. "Buying direct from the manufacturers will also help ensure the integrity of the product and improve patient safety," the firm added. US Oncology's drug distribution is slated to begin in fall 2005 through a Fort Worth, Texas facility. Cardinal previously handled drugs for US Oncology, but the company said it will not be competing with Cardinal since distribution will be limited to the US Oncology network of oncology practices. US Oncology became a private company in 2004 in anticipation of oncology reimbursement changes under the Medicare Modernization Act (1 (Also see "U.S. Oncology To Go Private Ahead Of Medicare Part B Changes In 2005" - Pink Sheet, 29 Mar, 2004.), p. 14). Medicare patients account for roughly half the volume of care provided by providers in the company's network. Adding distribution capabilities represents a long-term investment made possible by the private buy-out, US Oncology said, but is not specifically designed to position the company for the effects of MMA. US Oncology is not planning to serve as a vendor in the competitive acquisition program. Under CAP, vendors will furnish drugs to enrolled physicians; the vendors will bill Medicare for the products, and the physicians will be paid only administration costs (2 , p. 28). The company does not support CAP, citing patient safety concerns and the possibility for higher costs to oncology practices and Medicare. US Oncology joins other stakeholders in also maintaining that the program as currently envisioned would be financially unworkable for vendors (3 (Also see "Part B Competitive Acquisition Plan Needs Significant Changes, Attorney Says" - Pink Sheet, 25 Apr, 2005.), p. 21). |