U.S. substance abuse treatment market at a glance
The U.S. addiction/substance abuse treatment market is comprised of over 14,500 specialized drug treatment facilities(1)
- 70,237 drug overdose deaths occurred in the U.S. in 2017, 9.6 percent higher than 2016.(2)
- Opioids were involved in approximately 68 percent of all drug overdose deaths and more than 35 percent of opioid deaths involved a prescription opioid.(3)
- In 2018, an estimated 20.3 million people aged 12 or older had a substance use disorder. Of these only 18.2 percent or 3.7 million people received substance use disorder “SUD” treatment.(2)
- Spending on SUD treatment was approximately $56 billion in 2015.(4)
- The annual cost of substance abuse to the U.S. economy is estimated to be over $740 billion annually, including forgone productivity, healthcare, crime, etc.(1)
- The vast majority of substance abuse treatment facilities in the U.S. are privately operated, either for-profit or non-profit.(5)
- Under the Affordable Care Act (ACA), substance abuse treatment became an essential health benefits requiring coverage by health insurance plans.
- Prior to the ACA, substance abuse treatment services were not covered by 45 percent of non-group plans.(6)
- By 2020, the ACA is likely to increase mental health and SUD treatment spending by 2.7 percent.(5)
Percent of people in U.S. needing substance abuse treatment in the past year(3)
U.S. spending on SUDs(4)
Number of drug overdose deaths in the U.S.(2)
Substance abuse treatment facilities M&A activity overview
Several factors are driving consolidation of addiction/substance abuse treatment facilities by both private equity funds and strategic healthcare organizations
- The addiction/substance abuse treatment market in the U.S. is highly fragmented and is ripe for merger and acquisition activity, investments and partnerships.
- Historically, deals for substance use disorder treatment facilities have accounted for more than 40% of the total behavioral healthcare sector deals.(7)
- The ACA’s mandate for health plans to cover substance abuse services has put health insurance coverage within reach of many more affected individuals, which is increasing deal activity in the sector.
- Going forward, a healthy amount of activity is expected to continue within the sector and a number of small independent programs are likely to be acquired by larger, better capitalized, and more managerially sophisticated enterprises.
- Consolidation is expected to be driven by opportunities to leverage new regulations that increase access to care, and to introduce economies of scale and scope into a highly fragmented industry.
Substance abuse treatment facilities M&A activity(7)
Deal activity since 2014
Deal activity by geography since 2014
Key factors driving consolidation activity in the substance abuse treatment sector
Highly fragmented market with low concentration
The market is highly fragmented with most enterprises operating on a local or regional basis.
The number of substance users has increased to 164.8 million in 2018 which presents an opportunity for treatment facilities to grow(8).
Potential for economies of scale
Size advantages present an opportunity for investors to create value through improved profit margins and return on growth investments.
Favorable regulatory environment
Expanded healthcare coverage under the Mental Health Parity and Addiction Equity Act of 2008 and the Affordable Care Act of 2010.
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(1) National Institute on Drug Abuse
(2) National Center on Health Statistics, CDC WONDER - Drug Overdose Deaths in the United States
(3) Substance Abuse and Mental Health Services Administration - 2018 NSDUH Annual National Report
(4) Substance Abuse and Mental Health Services Administration - Behavioral Health Spending & Use Accounts (2006 – 2015)
(5) Substance Abuse and Mental Health Services Administration - Projections of National Expenditures for Treatment of Mental and Substance Use Disorders
(6) Kaiser Family Foundation
(7) Capital IQ, Company websites, and Press releases
(8) Substance Abuse and Mental Health Services Administration - 2018 NSDUH Annual National Report