McKesson Corporation, San Francisco, CA, has agreed to buy Oncology Therapeutics Network, a U.S. distributor of specialty pharmaceuticals, for $575 million.

According to Pembroke Consulting’s Adam Fein, OTN owns Onmark, a large buying group for thousands of small accounts. He says in his Distribution Trends blog: “Such forward integration makes it virtually impossible for a manufacturer to bypass and sell directly to the customer, because the distributor and the customer are the same company.” The customers of OTN will continue to operate as separate businesses.

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Sales of specialty drugs are increasing rapidly, especially oncology drugs. OTN serves more than 3,500 oncologists, 1,500 rheumatologists and other providers. Its annualized revenues are $3 billion. McKesson plans to combine the operations of OTN with the operations of McKesson Specialty, which is reported in the McKesson Distributions Solutions segment.
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“The integration of these two businesses will enhance our position in one of the fastest-growing categories of drugs in the U.S.,” said CEO John H. Hammergren.
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Between 2006 and 2010, sales of oncology drugs are forecast by IMS Health to increase from $30 billion to $60 billion.