SysteMed Tells Acquisition Bid

Mail-order drug distributor SysteMed Inc. Wednesday announced plans to acquire INSURx Inc., a Cleveland company that designs and manages prescription drug programs for employers and insurers.

SysteMed would exchange $20 million worth of its common stock for all the shares of privately held INSURx, which has created benefit plans--covering 2.5 million employees--that provide drugs either by mail or through a network of 24,000 retail pharmacies. The deal, subject to Securities and Exchange Commission approval, is expected to be completed in June.

Through its America’s Pharmacy Inc. subsidiary, SysteMed sells prescription drugs by mail at discounts of up to 40%. The proposed acquisition could eventually give SysteMed clients access to benefit plans designed by INSURx.

“We will now be able to go to a client and say, ‘We can provide the full benefits package,’ ” said Judith Woodward Archbold, SysteMed vice president and general counsel. “This will make us more competitive. It allows us to provide clients a more integrated, full-service management program.”

INSURx, which would become a SysteMed subsidiary, has a computer database that allows its clients to review the types and amounts of a doctor-approved prescriptions that a company’s employees are buying.

“Over and above the cost factor, this gives an employer an understanding of where the spending is taking place,” Archbold said.

More and more, companies trying to control rising health care costs are offering employees prescription drug packages. Consequently, firms like INSURx and America’s Pharmacy, whose clients get prescriptions at discount rates, have grown rapidly.

The INSURx purchase “is very, very significant for the company,” said analyst Peter H. Costa of Hancock Institutional Equity Services, a Boston-based company. “It’s a great acquisition. This is a way for them to control the entire pharmaceutical costs. This allows (SysteMed) to come to the table with both sides of the (prescription) benefits package.”

INSURx had sales of $8.5 million in 1991, up from $4.9 million in 1990. Gerald Chalfin, INSURx senior vice president, estimates that company revenue could reach $11 million this year.

Analysts say SysteMed wisely chose to shift its focus over the past five years from being a maker of the drug Isoprinosine, which is used to treat viral infections, to the mail-order prescription service. The mail-service pharmacy, operated through a central facility in Des Moines, Iowa, now accounts for more than 90% of its sales, Archbold said.

In 1991, SysteMed posted the first annual profits in its 20-year history. It made $1.4 million, or 10 cents per share, contrasted with a loss of $5.4 million, or 46 cents per share, the year before. The company reported revenues last year of $86.6 million, up 43% from $60.4 million in 1990.

In over-the-counter trading on the NASDAQ exchange Wednesday, SysteMed stock rose 62.5 cents to $7.125.