PSS World Medical, Inc. (PSSI), a medical supplies and equipment distributor to office-based physicians, recently extended its relationship with Minnesota Multistate Contracting Alliance for Pharmacy (MMCAP). In this regard, Government Solutions Group, a subsidiary of PSS World will work as the prime vendor to MMCAP, a voluntary group purchasing organization of healthcare facilities of the U.S Government. The deal extends to May 2014 with the flexibility for extension of up to 5 more years. However, financial terms of the contract have not been disclosed.
As a major vendor to MMCAP, PSS will supply its wide range of quality care products at a lower cost to MMCAP that provides a full range of pharmaceuticals and other healthcare products and services (including medical supplies, influenza vaccines, dental supplies, drug testing, wholesaler invoice auditing and returned goods) to state agencies, counties, cities, school districts, correctional institutions and public higher education. In the government’s current phase of budget cuts and staff retrenchment, PSS World expects its low-margin products to have a positive influence on MMCAP’s activities.
With increase in healthcare awareness amongst the aging population in the U.S., new medical technology, new pharmaceutical treatments and the recently enacted healthcare reform legislation that includes expanded insurance coverage, the medical products distribution industry is expected to experience continued growth in the forthcoming period. Recent industry reports point to 5% to 7% long term growth in the physician office end-market as well as long term growth of 1% to 3% and 5% to 7% in the care and home health care markets, respectively.
As a result, PSS World is currently focusing on the alternate site healthcare provider market that comprises the physician office market (worth $12 billion), long-term care and assisted living market ($4 billion), and home health and hospice markets ($11 billion). The company targets approximately 212,000 sites in the physician office market and 40,000 sites in the extended care market.
However, as a result of the current macroeconomic environment, PSS World is seeing increasing price competition from players like Patient Safety Technologies, Inc. (PSTX) and Bio-Reference Laboratories, Inc. (BRLI). Currently PSS World retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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