SXC Health Solutions

When a company doubles or even triples its size in one year, it is impressive enough, but more than 800% growth? Although it sounds impossible, that is what SXC Health Solutions did in the past year through a series of business wins and one gigantic acquisition.

“The bulk of our growth came through the acquisition, but we also announced sizeable sales with blue chip customers, including the Health Plan of San Mateo, PharMerica, and the State of Tennessee,” said Mark Thierer, president and CEO.

As we learned when we visited with SXC in 2008, the com-pany is one of the pioneers that built the technology used to manage the pharmacy benefit management (PBM) industry. It traces its roots back to Systems Xcellence, which provided electronic transaction processing systems to financial services and healthcare customers.

In 2001, after acquiring ComCoTec, a provider of pharmacy information processing solutions, the SXC brand was created, a company capable of providing different companies with an array of PBM tools, technology, and services to contain cost in pharmacy. SXC now has a full product line and a full suite of services for multiple market segments, 950 employees, 14 locations, and a mail order and specialty pharmacy where it distributes mail order and biotech prescriptions.

“We have a long history of being the technology leader in the PBM space. SXC has now emerged as the industry’s technology-enabled PBM, extending our technological footprint to provide all the services required to manage pharmaceutical spending,” said Thierer. “We help our customers save money on pharmaceuticals and provide better care to members in multiple markets.”

The company’s recent growth is truly remarkable. As of the end of its fiscal year in December 2008, the company did roughly $863 million in annual sales. That number reflects a growth rate of more than 800%. This year, growth won’t be quite so dramatic, as Thierer predicts the company will do roughly $1.3 billion in sales. But what were the conditions that led to such rapid growth in the first place?

The major reason behind the growth spurt is similar to what gave rise to the SXC brand in the first place—acquisition. Last year, the company acquired National Medical Health Card (NMHC), one of the larger publicly traded PBMs in the US. According to Thierer, the acquisition was the final piece of the puzzle in building out SXC’s strategic footprint. The last few quarters have been focused on integrating the operating platform, and the company is well ahead of schedule.

“We made a public commitment to complete integration quickly, laying out a five-quarter strategy to consolidate operating platforms. By the fourth quarter of 2008, we completed the bulk of the integration work and finished the conversion of the application platform,” said Thierer. “Short of closing two facilities, which we will have done by the end of this quarter, we are all but done with the integration.”

Sell your strengths

The company is also seeing growth thanks to a renewed focus on sales and marketing. SXC has five primary segments in its go-to-market strategy. The employer segment is focused on employers with 2,000 to 20,000 employees. Its health plan market is centered on regional health plans with roughly 250,000 covered lives. SXC also looks at state markets, specifically at the fee-for-service Medicaid space inside the state market. The fourth segment is what SXC calls the HCIT (healthcare information technology) market, larger health plans looking for technology-only solutions. The final segment is long-term care institutional pharmacies.

“From a marketing standpoint, we have specific go-to-market strategies for each segment, using e-mail and direct marketing, cold calling, and we work through the consultant community as well,” Thierer said. “It is a full-scale marketing strategy to get the company in front of many opportunities in each segment.”

As for its sales strategy, the company restructured its sales organization last year, bringing on new sales leadership and hiring about a half dozen new sales executives. Today, it has 10 full-time sales executives, three dedicated health plan salespeople, and dedicated sales teams for its state and long-term care business. Additionally, about 50 people in the company’s account management ranks sell products and services like mail order and specialty pharmacy services to existing customers. Thierer said having roughly 75 people selling services represents a large increase compared to a few years ago.

“Year over year, we have seen a five-fold increase in the number of active RFPs we are working on compared to the same time last year, and we’ve seen marked improvement across each segment,” he said. “About 30% of our bids are in the employer space, another 30% are in health plans, and the balance falls into the other three segments. Direct selling has the highest impact, but we are getting our name out through e-mail and direct marketing campaigns and consultant road shows.”

Because of its success in executing the NMHC integration, the company was able to reduce costs and enhance its ability to compete by quickly converting technology, consolidating sites, and reducing redundant head counts. SXC has more than 200 people focused on developing its next generation of products and services, spending about $10 million annually to continue its history of innovation, developing applications and building new features, functionality, and products to bring to market. In March, SXC received an Rx Benefit Innovation Award from the Pharmacy Benefit Management Institute (PBMI) for the second time in three years.

The company’s biggest short-term priority is generating new business and getting all hands on deck for the selling season for 2010’s new business. In the long term, SXC is determined to take a leadership position in the evolution of the industry from a supply chain driven business to an industry that revolves around information, insight, and analytics.

“The issue is managing pharmaceutical spending better, not just by relying on supply chain savings to provide deeper discounts. The future will be about making the right clinical decision based on better information and better analytics, then creating linkages with physicians, pharmacies, and other players in the healthcare value chain,” said Thierer. “SXC is uniquely positioned to define that new model as we have been the PBM technology leader for 20 years.”