AmMed Direct to layoff 223 employees

From: The Tennessean

Diabetic supply house plans to sell to Florida-based competitor, close shop

By Getahn Ward

Competition in the diabetic supply business led AmMed Direct LLC to give layoff notices to its 223 employees on Tuesday as it prepares to sell assets to a Florida-based competitor and then stop operating.

The deal with Arriva Medical of Coral Springs, Fla., is part of a consolidation trend in the mail-order diabetic supply business as regulatory changes create uncertainty.

Medicare, for instance, is rolling out a new competitive bidding system to determine which companies would continue to provide supplies to its beneficiaries and at what price — perhaps lower rates.

“Several companies are trying to get bigger because they know there’s going to be fewer companies, and they want to be one of the survivors,” said industry consultant Tom Milam, who expects the number of vendors nationally to fall from as many as 500 to as few as 20 companies.

The acquisition would be the second in a month for Arriva, a national provider of diabetic testing supplies, including meters and test strips.

Arriva had roughly $42 million in annual revenues at year-end. Earlier, it acquired mail-order supplier Direct Diabetic Source of Sunrise, Fla., for roughly $5 million.

Last fall, Arriva itself was acquired by publicly traded health care management company Alere Inc., of Waltham, Mass., for roughly $83 million in cash and stock.

In a notice to the Tennessee labor department this week, AmMed said Arriva intends to employ about 90 agents at a call center it plans to open in Nashville by subleasing a portion of AmMed’s office building here.

AmMed employees will get a chance to apply for those jobs soon, and AmMed itself will continue to use some employees to handle customers over the next 30 to 90 days.

All employees will receive wages and benefits through the next two months or until they’re hired by Arriva, according to a notice sent state officials under the WARN Act, which requires companies to give advance word of sizable layoffs.

Founded in 1999, AmMed grew to more than 400 employees as it rode a sharp jump in the number of Americans diagnosed with diabetes. It offered education and support to diabetic patients in addition to test supplies through the mails.

When Congress passed a prescription drug benefit for seniors, the company expanded into providing medications to people with diabetes.

But last summer, AmMed laid off 60 employees as the company shut down its pharmacy operations amid competition from large pharmacy benefit managers that dominate that niche. The PBMs that once awarded AmMed contracts to provide drugs through the mail to their members under various insurance plans opened their own mail-order pharmacies, making it more difficult for AmMed and other vendors to compete and win contracts.

Last month, AmMed chief executive Dennis Berry became the CEO of Tennessee Health Management, the Parsons, Tenn.-based company that owns and oversees AmMed.

In early 2010, AmMed also let go 80 people — or about 17 percent of its staff at the time — as the company faced internal issues and an uncertain U.S. economy.