UnitedHealth Group Inc. plans to acquire Catamaran Corp. for around US$ 12.8 billion in cash, to bulk up its pharmacy-benefit business, as spending on cutting-edge drugs is a growing concern for employers and insurers.
Not to mention, Catamaran is the fourth-largest pharmacy-benefit manager in the USA by volume of prescriptions processed, which will be merged into UnitedHealth Group’s OptumRx unit (the industry’s third-largest player and part of the Optum health-services arm of the health-care giant).
As per reports, UnitedHealth plans to pay US$61.50/share for Catamaran a 27% premium at Friday’s closing price of US$ 48.32. The deal is likely to take place in the 4Q as per companies’ information.
Both companies are reporting to bet that their combined size will generate increased negotiating heft and economies of scale, as they compete with Express Scripts Holding Co., the biggest in the industry, and CVS Health Corp., the No. 2.
According to Mark Thierer (Chief executive of Catamaran – likely to be chief executive of the new combined PBM):
“You have to have scale. This makes the business more competitive overall.”
As the companies report, OptumRx already has been using a technology platform from Catamaran, easing the operational transition.
Last year, Catamaran had US$21.58 billion in revenue, while OptumRx had US$31.98 billion. In year 2013, OptumRx expanded sharply when it took over pharmacy benefits for UnitedHealth’s insurance unit, UnitedHealthcare. UnitedHealth expects the deal to be accretive to its net earnings by about 30 cents/share in 2016. The company also said it affirmed its US$6- to US$6.25-a-share earnings outlook for this year.
Catamaran was known as SXC Health Solutions Corp until 2012, when it took its current name as it completed a merger with Catalyst Health Solutions Inc. Express Scripts acquired former rival Medco Health Solutions Inc. in year 2012.
According to the chief executive of Optum and vice chairman of UnitedHealth Group, Larry C. Renfro:
“These capabilities can all be combined with the pharmacy side.”
No wonder, the new OptumRx would pitch the benefits of analysis and data, including the broad array of health information that Optum’s other businesses glean and crunch. The companies said they hoped to improve patients’ adherence to their drug regimens, and executives pointed to deals like one recently reached by Catamaran, which tied payment for hepatitis C drugs to patients’ results.
