Shannon L. Wiley

Asembia is great not only for networking conversations that can lead to transactions but also for taking stock of your organization, identifying the capabilities that would complement your strategic position and, perhaps, discovering potential partners to fill those needs.

This year is off to an active start in specialty mergers and acquisitions, and synergy is the name of the game. That means pharmacies looking to go to market in the next 18 months can take steps to be better positioned for integration and scalability. Also, investors and strategic buyers can hone diligence checklists to find the best suited targets.

We are seeing vertical power plays in the large-scale transactions, such as CVS/Aetna, ESI/Cigna, and McKesson’s purchase of RxCrossroads and CoverMyMeds. However, Diplomat’s 2017 acquisition strategy is more in line with typical specialty pharmacy acquisition plans—a focus on building existing capabilities and expanding into adjacencies. In 2017, Diplomat purchased pharmacy benefit managers LDI Integrated Pharmacy Services and National Pharmaceutical Services, infusion pharmacies Focus Rx and Accurate Rx, as well as WRB Communications, a communications and contact center. Strategic investors and private equity firms are still aiming to build enterprise strength, but specialty pharmacies should not expect revenue and patient volume to carry the day&mdash;unique tuck-in capabilities are a must.

Integration capabilities, scalability, and a stable platform are hallmarks of a desirable target. A specialty pharmacy can take certain proactive measures to be more attractive and improve its position to hit the ground running post acquisition. A buyer, particularly one rolling up an enterprise, should be planning its exit when buying pharmacies. Corporate structure and asset allocation within the enterprise are fundamental drivers in a seller’s strategy. Specialty pharmacies that consider exit strategies from the outset will be well served.

Every acquisition requires integration, whether it be management teams only or a true merger combining operations, contracting, and even physical space. Two of a specialty pharmacy’s most important assets are its contracts and its key employees. Careful drafting of contracts, as well as sales force and management team noncompete language, can be crucial to ensuring a smooth transition postacquisition. Specialty pharmacies covet limited distribution drug contracts, lucrative pharmaceutical services relationships, and payer network inclusion, but antiassignment provisions or the other party’s required consent to add pharmacies to the contract reduce the contract’s value in a transaction.

Specialty pharmacies should consider negotiating the ability to assign the contract or add locations without consent, even if just to affiliates, in all valuable contracts. The flip side of assigning contracts is getting out of contractual obligations, such as wholesale prime vendor agreements that duplicate the acquirer’s contracts or otherwise not desirable postclosing. Unilateral “without cause” termination rights are hard to negotiate, which means if a specialty pharmacy gets the right to a without-cause termination, usually the counterparty will get the right, as well. That double-edged sword might not be worth the risk to a specialty pharmacy. Regardless, without-cause termination should be considered in all valuable contracts.

Protecting their industry footprint is also important to buyers, whether it be with key management employees that have the capability to start competing businesses or sales employees with deep relationships with customers. Severance is a fact of life in most acquisitions; therefore, specialty pharmacies should think about noncompete language when hiring. Employees can be asked to sign noncompete agreements as conditions of continued employment posthire, but this creates employee leverage, which can be difficult to navigate in the middle of a transaction. Buyers may insist on certain noncompete agreements as a condition to close the deal, which amplifies employee leverage. The negotiation is even trickier when the employee is a key sales team member or part of management. After all, noncompetes are a delicate topic under the best of circumstances. States vary on what is permitted in these agreements, which adds a layer of complexity. Specialty pharmacies should consider noncompete provisions at the time of hire and the scope of such agreements within the parameters of what will be enforceable under state law and would give a buyer comfort in a transaction.

Being prepared for the diligence process is also key in a smooth transaction and can facilitate integration. Our article in the December 2015 issue of 

, “Surviving Diligence: Key Concepts for Specialty Pharmacy Transactions,” provides tips for surviving diligence.

Scaling a business is just as important as integrating it, from a buyer’s perspective. This requires both flexibility and the foundation to make operational changes and increase capacity. For example, a specialty pharmacy may have primarily mail order or retail payer contracts, but to maintain network inclusion at higher volumes, a specialty contract would be required. A specialty pharmacy should understand the eligibility requirements for specialty network inclusion, such as holding multiple accreditations. According to Adam Fein, PhD, in an April 10, 2018, Drug Channels post, 729 unique pharmacy locations were accredited with the 3 major independent accreditation organizations at the end of 2017—almost double the 2015 number. Clearly, accreditation should be high on the priority list. If it is not feasible to pursue the accreditations, the specialty pharmacy should be mindful of the criteria and work toward meeting those&mdash;and certainly not take acts that might impede accreditation.

A specialty pharmacy can also take other acts to further scalability. For example, consider adjacent space when negotiating leases, and try to lock in price or negotiate volume discounts for future volume increases when negotiating vendor agreements. Push chief operating officers and operations management to be thoughtful and creative in developing teams and business flows. Connectivity among remote pharmacies can be key for allocating additional volume to a certain pharmacy.

A solid platform is a key component of being a valuable asset. This includes 50-state licensures free of any material unresolved disciplinary actions or limitations, broad payer coverage, strong relationships with drug manufacturers, and a robust compliance program. Certain state Medicaid programs require a pharmacy to have a brick-and-mortar presence in the state or an adjacent state; know and capitalize on those opportunities. Just as important as a strong platform is the ability to communicate and document capabilities. Documents of internal audits, compliance committee meetings, and management meetings can be pivotal in demonstrating capabilities. Clear and accurate financial documents also are essential. Often, a buyer is more concerned with a precise understanding of the specialty pharmacy’s platform than with the components of platform itself. To a buyer, understanding the asset is fundamental.

Whether it is a pharmacy or a private equity investor that is in the process of acquiring assets, buyers must anticipate and plan for either going to market in the future or spinning off discrete assets. They should be mindful of corporate structure and asset allocation during the purchase process. In addition, buyers should share their long-term strategy with their corporate and regulating legal counsel, asking for guidance on tax implications and structures that make selling business lines easier.

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Asembia is great not only for networking conversations that can lead to transactions but also for taking stock of your organization.

Use Asembia to Take Stock Before Going to Market

IN APRIL 2017, a group of related hospice providers settled claims that its common sales force provided kickbacks to referral sources for $12.2 million.

The settlement serves as a reminder of the need for robust policies addressing sales force interactions with referral sources, along with internal tracking and audit measures that ensure compliance with those policies. Such policies and tracking mechanisms can help avoid kickback and self-referral liability and avoid confusing and costly due diligence issues in transactions.

Whistleblowers alleged that hospice defendants International Tutoring Services, LLC; Goodwin Hospice, LLC; Phoenix Hospice, LP; Hospice Plus, LP; and Curo Health Services, LLC, submitted false claims to Medicare and Texas Medicaid due to the alleged payment of kickbacks by the defendants to the referral sources. The purported kickbacks included cash, gift cards, lunches, dinners, happy hours, tickets to sporting events, holiday gifts, cars, manicures and pedicures, guns, and the services of skilled nursing staff free.

Sales members were instructed to give more expensive items to administrators and directors of nursing and less expensive items to charge nurses and nursing staff. Along with the monetary settlement, prosecutors requested permission to intervene and prosecute fraud claims against 2 former executives.

Many specialty pharmacies permit their sales force to engage in some degree of expenditure on referral sources, but many lack detailed guidelines, policies on prohibited activity, or spending limits. Even fewer track expenditures attributable to each referral source.

Without tracking mechanisms in place, a specialty pharmacy may end up spending more than it intends on a particular referral source. As highlighted by the settlement, inappropriate interactions between a sales force (or any employee) and current or potential referral sources can run afoul of the federal Anti-Kickback Statute.

The Stark laws may also be implicated, in addition to state anti-kickback statutes that generally track the federal law, but do vary in some material ways. Therefore, specialty pharmacies should consult applicable state laws for variations.

The federal Anti-Kickback Statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by federal or state health care programs. Remuneration includes the transfer of anything of value, in cash or in kind, directly or indirectly, covertly or overtly.

Expenditures on sales forces, such as meals, sports tickets, happy hours, and gift cards, are all likely to be considered remuneration. The Anti-Kickback Statute is intent-based, but actual knowledge of, or specific intent to violate, the law is not required. If any single purpose is to induce referral or federal health care program business, the law is considered violated.

There is no express safe harbor or exception under the Anti-Kickback Statute regarding expenditures on referral sources. For this reason, specialty pharmacies often rely on varied guidance for guardrails. Some rely on the Code for Interactions with Healthcare Professionals published by PhRMA (PhRMA Code).

This is a voluntary code that outlines ethical relationships between pharmaceutical manufacturers and health care professionals. Because drug manufacturers experience different marketing dynamics and regulatory concerns than specialty pharmacies, some find the PhRMA Code does not offer a total solution for specialty pharmacy compliance.

Others rely on the Stark Nonmonetary Compensation exception (discussed below), but because there is no express regulatory basis for relying on the exception for Anti-Kickback Statute compliance, some specialty pharmacies find it is not the right fit for their risk tolerance. Still others take different approaches.

Also, the Stark law is implicated by expenditures on physician referral and arguably applies to amounts spent on those employed by physicians, such as nurses. Stark prohibits a physician from making referrals for certain designated health services, payable by Medicare or Medicaid, to an entity the physician (or an immediate family member of the physician) has a financial relationship with by way of ownership or compensation.

It also prohibits an entity from filing claims with Medicare or Medicaid for any DHS furnished pursuant to a prohibited referral. Prescription drugs are considered a DHS, and expenditures on sales forces, such as meals and sports tickets, are likely to be considered financial relationships. The Stark law is a strict liability statute, meaning that failure to comply constitutes a violation of the law regardless of intent.

The Nonmonetary Compensation exception, often relied upon by specialty pharmacies, permits payment from an entity in the form of items or services (not including cash or cash equivalents) that do not exceed an aggregate of $398 in 2017, as long as the compensation (1) is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician, (2) may not be solicited by the physician or the physician’s practice (including employees and staff members), and (3) does not violate the Anti-Kickback Statute or other federal or state law or regulation. The monetary limit is adjusted each year.

Despite the potential liability for inappropriate sales force interactions with referral sources, the exact application of these regulations and the parameters for appropriate spending on referral sources is far from clear. This lack of clarity can frustrate the creation of a definitive policy and often leads to a helter-skelter approach.

It is important that specialty pharmacies consult with their counsel to determine a legal analysis and compliance approach with which they have the most comfort. There is no one-size-fits-all approach. No item or service should ever be given to a referral source (or potential referral source) if one purpose is to induce referrals.

This should be the cornerstone of every pharmacy policy regarding interactions with referral sources. Aside from this general tenet, there are some other basic parameters that fit well in most, if not all, polices. Although each pharmacy’s policy will vary, below are some near-universal takeaways for compliant interactions with referral sources:

		No item or service should ever be given to a referral source (or potential referral source) if one purpose is to induce referrals.

		Set yearly individual spending limits. While specialty pharmacies may get comfortable with different amounts, a spending ceiling drives consistency and makes tracking compliance with a policy much easier.

		No item or service should be extravagant. Whereas meals may facilitate conversations about the specialty pharmacy’s value proposition, pedicures, sports tickets, concerts, and entertainment events should be avoided. Set a per item limit as well. A specialty pharmacy may get comfortable with an annual spending limit of $350 per referral source, but a single meal at which $300 was spent on a referral source is likely to be viewed as unacceptable by a regulator.

		Require receipts for expenditures and attendee lists so that expenses are allocated to the appropriate referral source.

		Review expenditures monthly or quarterly to monitor expenses.

		Train your sales staff at least once per year. When sales teams understand the reasons for rules, they are more likely to follow them. Train with realistic examples.

With clarity lacking, it becomes even more imperative to track spending on referral sources closely and evaluate expenditures, with an eye for detail.

Many specialty pharmacies permit their sales force to engage in some degree of expenditure on referral sources, but many lack detailed guidelines, policies on prohibited activity, or spending limits. 

The Need for Specialty Pharmacies to Track Spending on Referral Sources

 in the specialty pharmacy (SP) space during the last couple of years involved Novartis and the alleged offering of improper reimbursements for recommended uses of the drugs Exjade and Myfortic.

The case concluded in November 2015 when Novartis agreed to pay $390 million to resolve the claims. In the aftermath of the settlement, there was much attention given to SP/manufacturer service programs. Industry players scoured the various court documents, searching for practices and facts that might motivate future prosecutions of such drug adherence programs.

Although there is still much debate and ambiguity surrounding the particulars of these adherence programs, one aspect of the Exjade/Myfortic litigation provides straightforward practical guidance, but has received little consideration: the addendum to Novartis’ Corporate Integrity Agreement (CIA).

The CIA recites requirements for SP service programs, specific contract requirements, contract process procedures, and training specifics for Novartis. The CIA should not be disregarded, as it provides workable guidance for SPs structuring a pharma-contracting and services compliance program.

The CIA does not create an exhaustive legal compliance framework, and an individual legal analysis of each arrangement is essential. The CIA does, however, provide a checklist to help ensure compliance with the Anti-Kickback Statute (AKS), which makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive anything of value, in cash or in kind, to induce or reward referrals of items or services reimbursable by federal or state health care programs (eg Medicare, Medicaid, Tricare, etc).

As a reminder, the Exjade/Myfortic litigation involved Novartis’ Exjade Patient Assistance and Support Services (EPASS) program, which included 3 network SPs (among other things). At one point in the business relationship, referrals from the Novartis hub were allocated based on patient adherence.

		Patient adherence scores resulting in hub referrals did not take into account patients who discontinued Exjade use because their prescriber advised discontinuation over side effects.

		There were discussions with the SPs about low adherence rates and allocation of referrals, based on scorecard numbers.

		When a black box warning was added in 2010, SPs were not required to update patient adherence scripts with the information.

Defendants BioScrip and Accredo, settled earlier in the litigation for approximately $15 million and $60 million, respectively.

One set of the CIA requirements outlines basic compliance tenets of SP services provided on behalf of manufacturers. Employees responsible for developing, contracting, implementing, and auditing these programs should be aware of these basics.

During the negotiation and development stages, these essential guideposts should be considered:

		The manufacturer must have an articulable business need for each service.

		The compensation for the services must be fair market value.

		The services may not be reasonably expected to undermine, or otherwise interfere, with the clinical judgment of health care professionals (HCPs).

		The services cannot have the effect of encouraging HCPs to prescribe any specific product over another.

		Each arrangement must be vetted through a formal review and approval process.

As discussions of service arrangements mature into contracts, there are certain contract terms and elements of review that should be present for each arrangement. The framework below is a basic structure generally applicable to SP/manufacturer service agreements.

Also, the contracting process should be more than just an exercise of passing paper between the parties. The CIA outlines processes to ensure that material stakeholders are appropriately engaged in the development of service programs:

		Each arrangement must be memorialized, in writing, and signed by both parties.

		The contract must accurately include the entire business relationship.

		The contract should contain a manufacturer representation that there is a legitimate business need for the services.

		The contract should contain a representation, by each party, that it will not violate the AKS.

		There should be measurable key performance indicators (KPIs) associated with each service provided, and compensation should require meeting certain KPI metrics.

		Each material stakeholder should certify that the written agreement reflects all the material terms of the arrangement and recertify the same, annually.

		Each contract should be vetted through the formal contracting review process.

The CIA highlights that structuring arrangements in compliance with the AKS and drafting contracts that properly reflect the arrangement are only part of AKS compliance. Arrangements must remain in compliance.

Often, modifications to operations processes occur as service programs morph to fit changing market dynamics or to hone operational efficiencies. These modifications are too frequently informal and not vetted appropriately.

A compliance program is an essential tool to ensure that service programs do not migrate into offerings that are no longer in compliance with applicable law:

		The SP should create a tracking system to record the services and payments under each arrangement. The tracking system should be used to ensure that the SP is meeting its KPIs and that payment for the services is in accordance with the performance metrics.

		A compliance committee should be formed to monitor ongoing contract compliance. A senior management employee or executive, such as the chief compliance officer, should conduct an annual review of the compliance tracker and report the findings to the compliance committee.

		A protocol should be established to respond to suspected compliance issues reported by employees or raised through the contracting or annual review process.

		If risks are identified, an assessment of the risks should be performed. A plan for monitoring the risk should be created and implemented. If corrective action is warranted, it should be identified and implemented.

All employees should be trained annually on federal program requirements, internal policy requirements, individual responsibilities for complying with applicable regulations, sanctions associated with violations, and examples of improper practices.

The training should include components specific to the individual’s job function. Implementing a structure for vetting manufacturer service programs and revisiting through regular compliance reviews offer an excellent mechanism for mitigating risks associated with manufacturer service programs.

Through a formal process, all material stakeholders become involved and required sign-offs ensure certain basic compliance elements are met. The CIA offers practical guidance on building such compliance programs and should not be overlooked by SPs and industry stakeholders. 

Michael R. Hess is a member of Bass, Berry & Sims PLC and leads its specialty pharmacy, pharma services and distribution practice, and is based in the firm’s Memphis, Tennessee, office. He is the former chief counsel and vice president of strategic development at Accredo Health Group and assistant general counsel for Accredo’s parent, Medco Health Solutions. Bass, Berry & Sims PLC has more than 220 attorneys representing numerous publicly traded companies and Fortune 500 businesses. The firm has three offices in Tennessee (Nashville, Memphis, Knoxville) and one in Washington, DC. 

Shannon L. Wiley is an associate of Bass, Berry & Sims PLC in its specialty pharmacy, pharma services and distribution practice, and is based in the firm’s Memphis, Tennessee, office. Bass, Berry & Sims PLC has more than 220 attorneys representing numerous publicly traded companies and Fortune 500 businesses. The firm has three offices in Tennessee (Nashville, Memphis, Knoxville) and one in Washington, DC.

Industry stakeholders must carefully examine every detail of drug adherence programs to ensure compliance with the Anti-Kickback Statute.

Novartis Corporate Integrity Agreement Provides Outline for Pharma-Contracting Compliance Programs

—it’s a core part of every transaction, however, the quality and intensity of diligence varies widely.

Often, buyers and sellers of specialty pharmacies (SPs) focus so heavily on the financial aspects of a transaction that they overlook regulatory and operational issues that are essential for proper valuation or that may expose potential risks and liabilities that can undermine the ability to operate the pharmacy successfully.

Providing a buyer clear and concise documentation evidencing the SP’s operations and practices is often the key to a successful transaction. Even though a seller may have compliant practices, the lack of good documentation may kill a deal.

Good documentation can also be very helpful in the post closing integration process. Furthermore, a strong deal team is a must-have for both buyers and sellers.

Good deal teams often consist of executive-level SP staff, financial and accounting support, operations and billing consultants, and legal counsel with industry depth and a finger on the pulse of the market. Diligence is an exhausting and sensitive process.

Buyers with a thoughtful game plan and a seasoned deal team will be much more likely to spot a bad deal early and walk away or properly value and close a good deal. For a seller, preparation and a strong deal team can be essential to making a buyer comfortable and ensuring the deal closes.

Understanding potential buyers’ interests, pain points, typical concerns, and market “hot points” can help sellers get their house in order before going to market, thus easing tough discussions during diligence.

These preparations often include conducting a mock diligence interviews; gathering the documents typically requested during diligence; completing a review of the seller’s business and practices to identify and resolve difficult issues, and conducting market intelligence to highlight current “hot-issues” affecting recent transactions.

Often, the very act of gathering the documents required to complete a typical diligence request list will help a pharmacy identify gaps in its operational and regulatory compliance efforts. This proactive approach also allows enough time for the pharmacy to take appropriate corrective action if needed.

During the diligence process, buyers vet SPs for financial strength, operational prowess, and regulatory compliance. Buyers should strive to achieve a balance by focusing on important relevant information and digging in with strategic follow-up and corroborative requests.

Getting bogged down in minutiae can drive inefficiency, but allowing a seller to spoon-feed a buyer only selected information can lead to unwanted surprises later during integration. It is also important to be on the lookout for potential complications of “upsizing.”

Operational practices that are somewhat common in smaller SPs because of the SPs’ lack of regulatory and operational sophistication often have to change post close. The buyer must consider the impact of these changes on valuation, especially if the practices are revenue drivers or if the cost of improving compliance is material.

Even when the buyer can overcome these compliance concerns, it may insist on earn-outs or significant indemnification and escrow obligations. Good diligence is pointed and deliberate.

A review of the following areas allows a seller to highlight its practices and a buyer to get a material understanding of the asset.

: perhaps the most significant aspect of diligence is the quality of earnings (Q of E) assessment. Generating a Q of E report may take time, and buyers should start the process as early in diligence as possible. Since unexpected Q of E results can derail a deal, it is better to have that information early in diligence before significant time and money are invested. Early alignment between legal diligence and the preparation of the Q of E can be a great way to lower overall costs while driving more impactful analysis of financial practices of the pharmacy.

: a buyer should look at sales policies and practices to ensure compliance with Stark Law, the Anti-Kickback Statute, the Civil Monetary Penalties Law, and applicable state laws. Interactions, gifts, and entertainment provided to referral sources, including referral practice office and nursing staff, should be analyzed. Buyers tend to look for expense reports containing certain key information to confirm compliant practices. If expense reports do not provide sufficient documentation of sales staff activities, interviews with staff members may be required. Patient relationships, particularly in genetic diseases such as hemophilia, will be reviewed. Sales staff compensation structures will be reviewed. An SP considering going to market should consider periodic training of its sales staff, maintain close review of its practices, and require sufficient documentation to prove its compliant practices.

: reimbursement diligence is often deep and wide. Among the areas reviewed are billing and coding, co-pay collections, billing for non covered services and wastage, prior authorization practices, and determination of medical necessity. Buyers carefully review patient financial assistance programs to determine compliance and proper documentation. Reimbursement consultants dig deep to uncover disparities in an SP’s reported and actual practices. Noncompliant reimbursement practices can result in significant legal or recoupment liability. Sellers who cannot show solid billing practices may have to accept less-than-favorable indemnification obligations. SPs with lax co-pay collection practices, or financial assistance policies that do not require documentation of a bona fide financial need, may have to take a higher percentage of the purchase price as earn-out to share the risk that patients may go elsewhere once the SP converts to the buyer’s more rigorous policies post-close.

: operations diligence can be the most sensitive area of analysis for both buyers and sellers. Unlike other areas where the analysis tends to be more objective, each SP has its unique value proposition that has been purposefully crafted through deliberate operational processes. A buyer’s exacting analysis of the SP’s operations can prompt emotional responses, which are often counterproductive. SPs benefit from strategically crafting a deal team that harnesses external industry experts and key internal players well versed in both the seller’s offering and the buyer’s expectations.

: buyers often target SPs based on strategic payer coverage or limited distribution drugs. If those contracts can be terminated by the payer/manufacturer upon a change of ownership, buyers may become gun-shy. However, contract diligence is more than checking stacks of paper for change of ownership provisions and making lists of payer coverage and limited distribution drugs. The regulatory landscape for SPs is ever evolving, even more so recently. A savvy buyer’s counsel will dig in on key contractual relationships, particularly those in which manufacturers pay the SP for enhanced services, to ensure the target’s current obligations are in line with the buyer’s risk tolerance.

: adequate licensure may seem like a no-brainer for an SP going to market, but keeping up with the ever-changing state pharmacy law requirements can be burdensome for small to mid size SPs. A seller’s failure to maintain adequate licensure may raise concerns for a buyer and add unwanted friction to the negotiation process. Sellers would benefit from having a dedicated employee chart to assist with ensuring compliance with state pharmacy obligations. In the last year, many states have added requirements for compounding pharmacies. For SPs that compound any product, a review of state licensure could be beneficial.

: compliance diligence often goes beyond a review of policies. Buyers will also want to understand how well the seller monitors and complies with its policies. SPs considering going to market would benefit from revisiting their training modules and conducting a Health Insurance Portability and Accountability Act risk assessment.

: buyers are often reassured when management level employees, particularly those integral to operations, and sales staff have executed noncompete agreements. SPs considering going to market may want to put non-competition agreements in place as a preparatory act. Once employees learn of possible transactions, obtaining a non-competition agreement may be a more difficult task. 

A good diligence team can help sellers survive diligence and keep buyers from getting less than they bargained for. The best diligence teams not only know the industry, the market, and the SP’s strategic plan, but also show efficiency and sensitivity in their roles.

It is rare that one or two SP employees will know enough about the SP to run diligence alone. However, an executive management team member with a deep understanding of the roles and responsibilities of the SP’s management team and good working relationships with those team members can often run point effectively.

Consultants who have experience in the SP space can efficiently dig in on issues that otherwise would be difficult challenges in diligence. For example, accounts receivable reports usually do not clearly give a picture of an SP’s collection of co-pays, but a consultant savvy in the issue can provide a good analysis.

Legal counsel that understands the industry and market can help spot risks and valuation concerns for both buyers and sellers. Team members who are cognizant of the pain points of the other side are better suited to frame diligence requests and responses.

While a diligence team must be detail-oriented, it is just as important that buyer and seller teams approach diligence with a certain level of sensitivity. Building trust and respect during diligence facilitates a smooth and profitable integration. That is a win for both sides. 

 is a member of Bass, Berry & Sims PLC, in Nashville, Tennessee, and leader of its specialty pharmacy, pharma services, and distribution practice, based in Memphis, Tennessee. He is the former chief counsel and vice president of strategic development at Accredo Health Group and assistant general counsel for Accredo’s parent, Medco Health Solutions.

 is an associate of Bass, Berry & Sims PLC, in its specialty pharmacy practice, and is based in Memphis, Tennessee.

Financial concerns among buyers and sellers of specialty pharmacies often take precedence over concise operational documentation that can kill a potential deal.