Insurance giant Humana (NYSE: HUM) has entered into a definitive agreement to acquire Philadelphia-based hospice pharmaceutical provider and benefit manager Enclara Healthcare, for an undisclosed amount.

The transaction includes the privately held pharmacy company’s subsidiaries Enclara Pharmacia, GuidantRx and Avanti Health Care Services and is expected to close during the first six months of the new year. Humana indicated that the purchase would have little impact on 2020 earnings.

“Enclara represents a logical extension of Humana Pharmacy’s strategy given the company’s unique ability to play a role in advanced illness care and supplement our existing care delivery system,” said Scott Greenwell, president, Humana Pharmacy Solutions. “We look forward to leveraging and expanding the capabilities of Enclara to further advance our clinical management expertise.”

In recent years Humana has been expanding its operations to include ownership of various components of the health care continuum. Last year, the company acquired the large hospice and home health care providers Kindred at Home for $4.1 billion and Curo Health Services for $1.4 billion. Private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe partnered with Humuna on the Kindred transaction.

Also in late 2018, Humana began partnering with Walgreens to launch a primary care program focused on seniors, initially in the Kansas City, Missouri area, Home Health Care News reported last summer.

Enclara’s business is focused primarily on hospice, providing comprehensive pharmacy and pharmacy benefit management services, including mail-order medications, enhanced mobile medication management with electronic medical record connectivity, such as through the company’s E3 Mobile application, designed to reduce necessary data entry and simplify clinical workflows.

Pharmacy benefit managers take on many of the tasks associated with medication management and delivery to help build efficiencies.

Medications are a top expense for hospice providers, who are dependent on capitated per diem payments from Medicare. Hospices can’t increase the amount of their income per patient, so they must rely on creating efficiencies and effective cost management to raise their margins.

In addition to medications themselves, hospices spend time, effort and money on medication management and reconciliation, data analytics regarding medication utilization, documentation required by the U.S. Centers for Medicare & Medicaid Services (CMS), and access to support from clinical pharmacists.

The expenses are compounded when the hospice factors in associated costs such as the time that staff spend educating patients and families about their medications, reviewing medication lists to ensure the patient has an appropriate drug regimen, coordinating care that includes some medications covered by the Medicare Hospice Benefit and some covered through Part D, as well as delivery and supplies such as infusion pumps and IV tubing, among others.

Among other services a PBM can implement hard stops that require special review and approval when a drug price goes above a certain threshold.

Enclara currently serves more than 450 hospices nationwide.

“I am excited about the opportunity to work closely with Humana to carry on Enclara’s mission of serving as an invaluable resource to hospice providers,” said Andrew Horowitz, Founder and Chief Executive Officer, Enclara Healthcare. “This combination will allow Enclara to accelerate innovation aimed at delivering timely and cost effective pharmacy solutions.”