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CareFusion Adds Pharmacy Automation Firm to Its Portfolio

Medical technology company CareFusion Corp. has signed a deal to acquire a Seattle-based software and consulting company that helps hospital pharmacies better manage their inventory and lower their costs.

San Diego-based CareFusion — the fifth-largest publicly held company in San Diego County based on market capitalization — said it will purchase PHACTS LLC for an undisclosed price and roll the company into its core Pyxis dispensing technologies portfolio.

This marks the third acquisition in less than a year for the dispensing technologies business unit.

In August, CareFusion closed on its $150 million purchase of Rowa, a Germany-based company specializing in robotic medication storage and retrieval systems for retail and hospital pharmacies.

“We continue to make progress in optimizing our product portfolio and expanding our geographical footprint,” Kieran Gallahue, chairman and CEO, said in a statement earlier this year, referencing the Rowa deal.

And in spring of 2011, CareFusion spent about $20 million to acquire Vestara, an Irvine-based company that makes an “eco-station” for managing pharmaceutical waste.

The product helps CareFusion’s customers address growing environmental concerns over medicine disposal; U.S. hospitals purchase more than 4 billion vials, bottles and ampoules containing hazardous materials and generating more than 84,000 tons of hazardous waste annually, the company said.

The string of acquisitions fits into CareFusion’s goal to offer hospitals safe and efficient systems for managing medication throughout their facilities, from the loading dock to the patient’s bedside and through to waste segregation, said Rusty Frantz, senior vice president and general manager of dispensing technologies for CareFusion.

An Established Relationship

CareFusion has been working closely with PHACTS since November 2010, when the two companies entered into a five-year deal that allowed CareFusion to become the exclusive distributor of PHACTS’ products, Frantz said.

The 40-person Seattle company makes a software system called Pharmogistics and equipment that helps hospitals sort medicine and label it with bar codes, Frantz said.

He noted that a key benefit of PHACTS’ technology is its ability to help health care systems — not just individual hospitals — reduce errors in filling prescriptions and keep close tabs on their medication supply, particularly in light of drug shortages, Frantz said.

“There’s a consolidation today of hospitals into health systems,” Frantz said. “These rollups occur because hospitals are looking to adopt a ‘Centers of Excellence’ model and gain economies of scale.”

PHACTS also has a consulting component; it coaches pharmacy staffs through the switchover to the more automated system — a transition that requires finesse considering that pharmacies must continue to operate during that time, Frantz said.

By adding the PHACTS products to its dispensing technologies portfolio, “CareFusion is better positioned to help hospitals realize significant savings, including a reduction in medication inventory on-hand levels by up to 40 percent,” Tom Leonard, CareFusion’s president of medical systems, said in a statement.

Dealing With Consolidation

CareFusion spun out of Dublin, Ohio-based Cardinal Health in 2009 as a pure-play technology company, and has been steadily growing since — both organically and through acquisitions.

“As our customers continue to consolidate into larger and larger health systems, we’re investing to make sure that we’re there,” Frantz said. “That’s where the puck is going.”

In addition to medication dispensing technologies, the company sells products for infection prevention, respiratory care, and operating room efficiency, among other things.

In February, the company announced plans to buy back as much as $500 million in stock through the end of 2013, a move that it said was motivated by its commitment to boosting shareholder value. It’s the first buyback authorization in CareFusion’s history. The company had 227 million shares on the market at the end of 2011.

CareFusion trades on the New York Stock Exchange under the symbol CFN. In the last year its stock price has ranged from $22.01 to $29.97.

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