By Anna Mathews
UnitedHealth Group Inc. plans to acquire Catamaran Corp. for
about $12.8 billion in cash, bulking up its pharmacy-benefit
business as spending on cutting-edge drugs is a growing concern for
employers and insurers.
Catamaran, the fourth-largest pharmacy-benefit manager in the
U.S. by volume of prescriptions processed, 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.
UnitedHealth will pay $61.50 per share of Catamaran, a 27%
premium over Friday's closing price of $48.32. The companies said
they expect the deal to close in the fourth quarter.
Pharmacy-benefit managers typically work for employers and
health plans, managing the pharmacy benefits and seeking to
negotiate favorable prices with pharmaceutical companies and
drugstores. The two companies are betting 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.
"You have to have scale," said Mark Thierer, the chief executive
of Catamaran who will be chief executive of the new combined PBM.
"This makes the business more competitive overall." The companies
said that OptumRx already has been using a technology platform from
Catamaran, easing the operational transition.
Catamaran had $21.58 billion in revenue last year, while OptumRx
had $31.98 billion. OptumRx expanded sharply when it took over
pharmacy benefits for UnitedHealth's insurance unit,
UnitedHealthcare, in 2013. Both companies have been growing
recently, though Catamaran in February announced the loss of two
health-plan clients, putting pressure on its shares despite
fourth-quarter earnings that beat analysts' expectations.
UnitedHealth said the deal would be accretive to its net
earnings by about 30 cents a share in 2016. The company also said
it affirmed its $6- to $6.25-a-share earnings outlook for 2015.
The deal will be the latest consolidation in the
pharmacy-benefit sector. 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
2012.
The industry is focused on reining in costs associated with
specialty medicines like new treatments for hepatitis C.
Prescription-drug spending rose more than 12% last year in the
U.S., the biggest annual increase in more than a decade, according
to a report by Express Scripts. The increase was driven partly by
the hepatitis C drugs, as well as price increases for some diabetes
and cancer medications. The boost came after years when growth was
muted by the introduction of generic versions of popular drugs.
Insurers and employers are bracing for the prices tied to
expected new treatments for cancer and other conditions such as
elevated cholesterol. Pharmacy-benefit managers are eager to show
they have tools to counter those costs on behalf of clients.
If the OptumRx deal with Catamaran is consummated, each of the
big-three PBM players would offer a different setup. Express
Scripts has the largest volume in the industry. CVS has its own
network of pharmacies.
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. "These capabilities can all be
combined with the pharmacy side," said Larry C. Renfro, the chief
executive of Optum and vice chairman of UnitedHealth Group.
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.
Executives from Catamaran and UnitedHealth said their customer
groups should mesh well. But Catamaran currently has clients that
are rivals of UnitedHealthcare. For instance, in 2013 Catamaran
struck a 10-year deal to help handle pharmacy-related matters for
Cigna Corp. Mr. Thierer said he expected that Catamaran's
health-plan customers would "see the benefit they will get from
this relationship on all different levels."
Write to Anna Mathews at anna.mathews@wsj.com
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