What’s behind the recent surge of investments into the infusion industry? The ambulatory infusion center (AIC) industry has seen a significant surge in investment in recent years. This trend is driven by a number of factors, including an aging population, an increase in chronic diseases, and a shift towards more cost-effective, out-of-hospital care.
What Is Private Equity?
Private equity is a broad term which generally refers to private investment funds that make investments in privately owned companies. There are many different types of private equity firms, each with their own strategy. Firms differ by investment size, industry, and strategy (control investment, minority/growth investment). In each of these examples, the firm has a mandate to make an investment and sell that investment (an exit) within 3-7 years from the investment date.
Why The Interest In The Infusion Industry?
Private equity firms are generally drawn towards large industries, with long term growth wins, and where no dominant winner has emerged (and thus there is an opportunity for growth). The infusion industry checks all of these boxes. The industry is a $100bn industry growing and high single digits. These tailwinds are driven by a number of factors perceived to be attractive to private equity investors.
- A large and aging population: An aging population is one of the key drivers of the AIC industry. As people live longer, they are more likely to develop chronic diseases such as cancer, rheumatoid arthritis, and multiple sclerosis, which require ongoing infusion therapy. In addition, older adults are more likely to have multiple chronic conditions, which can lead to a higher utilization of AIC services.
- The number of people with chronic conditions: An increase in chronic diseases is another key driver of the AIC industry. Chronic diseases such as cancer, rheumatoid arthritis, and multiple sclerosis often require ongoing infusion therapy, which can be administered in an AIC setting. This trend is expected to continue as the prevalence of chronic diseases continues to rise.
- The pipeline of specialty infusion drugs in development: Nearly 80 percent of new drug introductions are considered specialty medications. In 2021, there were roughly 40 specialty medications added to the market. 1
- The shift in care out of the hospital: A shift towards more cost-effective, out-of-hospital care is another key driver of the AIC industry. AICs offer a cost-effective alternative to inpatient care, as they are typically less expensive to operate than hospitals. This is particularly true for patients with chronic diseases, who may require ongoing infusion therapy.
These conditions are true today, and will likely be true in 10 years, which gives private equity firms conviction when investing in the industry. The industry is also highly fragmented, with no dominant player, which private equity tends to view as opportunity.
A factor very important to any private equity firm when making an investment decision, is whether the target company (or the target industry), has a tangible and meaningful value proposition. In this area, the ambulatory infusion industry is highly attractive for private equity investors.
The ambulatory infusion industry has an incredible value proposition for all stakeholders, supported by the following:
- It is significantly more affordable for the hospital and the home
- It is safer and more desirable for patients than all other care settings
- It is good for pharma, as it creates access for the drugs which they are investing billions in developing
These three unique value propositions make the AIC industry highly desirable.
What Does This Mean For Patients?
The recent surge in investment in the AIC industry is good news for patients. AICs offer a more convenient and cost-effective alternative to inpatient care, and they are well-suited to meet the needs of patients with chronic diseases.
Gone will be the days where patients need to go to the hospital outpatient infusion center. Patients will have options to choose where they receive care. They will benefit from closer options, with increased availability.
As more investors acquire into the industry and invest in growing those companies, the industry will likely become more competitive. Many markets will see two or three AIC companies competing for the same patients. You will see companies invest heavily in the patient experience as a way to attract patients. Think about it. 10 years ago, there were zero infusion centers with private infusion suites. Now this is commonplace in certain regions. The competition via patient experience will be an enormous win for patients.
What Does This Mean For Incumbent Infusion Providers?
For incumbent infusion providers, the growth of the AIC industry is both a challenge and an opportunity.
If you are an infusion provider, you will likely see new well-capitalized players growing aggressively, often in your market. This increased competition could be a threat. Instead of being the only shop in town, your sales reps will begin frequently bumping into the sales reps of competitors, each pitching a reason to send patients to their respective centers.
The increased competition is also an opportunity to revisit your operations and work to improve the experience you offer to patients. Great competitors breed great operators, and the existence of competition will instill more urgency and discipline in infusion providers.
If you are an incumbent infusion provider, you are also in the drivers seat. You are operating in an industry with intense investor interest, which means if you want to sell your business, or a piece of your business in the next three years, there has likely never been a better time.
The interest from private equity will also benefit incumbent players in recruiting talent. Private equity investors have done a great job of educating the broader healthcare landscape about the opportunity in the industry. Investments by firms such as Oak HC, Great Hill Partners, and Noro Mosely provide validation to talented executives that this is an exciting and promising industry to be in. Incumbent operators will be able to recruit talent that might not have been available 5-10 years ago before the surge of interest.
Overall, the recent surge in investment in the AIC industry is a positive development for patients and incumbent infusion providers. It is expected to continue to grow as an aging population, an increase in chronic diseases, and a shift towards more cost-effective, out-of-hospital care. The AIC industry is well-positioned to meet the needs of patients with chronic diseases and provide convenient, cost-effective care.
However, it’s important to note that the Ambulatory Infusion Center industry is heavily regulated by the government. Therefore, it’s essential for new entrants and incumbent providers to comply with the regulations to avoid any legal or financial issues. Also, with the ongoing Covid-19 pandemics, the industry is facing new challenges and the future of the industry is uncertain.
In conclusion, the recent surge in investment in the AIC industry is a positive development for patients and incumbent infusion providers. It is expected to continue to grow as an aging population, an increase in chronic diseases, and a shift towards more cost-effective, out-of-hospital care. The AIC industry is well-positioned to meet the needs of patients with chronic diseases and provide convenient, cost-effective care, but it’s important to navigate the industry while complying with the regulations and staying aware of the ongoing challenges.
Sources & Citations
- https://www.fda.gov/drugs/new-drugs-fda-cders-new-molecular-entities-and-new-therapeutic-biological-products/novel-drug-approvals-2021
About the Author
Woody Baum is the founder and CEO of Local Infusion, a venture-backed digital health company focused on patients with chronic autoimmune diseases on specialty medications. Prior to this, Baum was the CEO of OI Infusion, the largest office-based infusion management company in the Northeast.
About the National Infusion Center Association
NICA is dedicated to ensuring that the nation’s infusion centers remain a safe, more efficient, and more cost-effective alternative to hospital settings for consistent, high-quality care.
Infusion providers have a vested interest in the sustainability of the infusion delivery channel and its ability to serve vulnerable patient populations. NICA Provider Members have a voice and a seat at the table to inform NICA’s activities and the opportunity to remain highly engaged in the expansion and optimization of the infusion industry. Learn more about becoming a NICA member, here: https://infusioncenter.org/member-partner-page
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