Health insurer UnitedHealth Group Inc. has agreed to buy Catamaran Corp. in a deal worth about US$12.8 billion to better compete with bigger rivals such as Express Scripts Holdings Co. in the pharmacy benefit market.
Pharmacy benefit managers administer drug benefits for employers and health plans and run large mail order pharmacies, helping them get better prices from drugmakers.
The deal with Catamaran will give UnitedHealth’s pharmacy benefits unit, OptumRx, the scale to negotiate favorable prices from pharmacy companies, Reuters reported Tuesday.
Drug prices in the United States rose 12 percent in 2014 due to a new treatment for hepatitis C that cost more than US$80,000 but cured almost all recipients with few side effects.
Another new class of drugs, to treat high cholesterol, is expected to hit the market in 2015 and has insurers worried about drug costs this year as well.
The purchase of Catamaran will increase UnitedHealth’s market share to 15 percent to 20 percent of the people who receive their drug benefits through pharmacy benefit managers, BMO Capital Markets analyst Jennifer Lynch said.
With a combined one billion scripts annually, UnitedHealth will be about the same size as industry No. 2 CVS Health Corp, she said
Catamaran was formed after SXC Health Solutions and PBM Catalyst Health Solutions merged in 2012.
UnitedHealth’s offer of US$61.50 per share represents a premium of 27 percent to Catamaran’s Friday close on the Nasdaq.
Catamaran’s stock was trading at US$60.01 premarket on Monday while UnitedHealth was up nearly 4 percent.
The deal “makes sense to us, but admittedly came much earlier than we expected”, Jefferies analyst Brian Tanquilut said.
“We had always viewed Catamaran as a compelling asset for companies looking for scale in the PBM sector such as Optum or Walgreens but expected Catamaran to grow the business much further before pursuing a sale.”
The deal value is based on Illinois-based Catamaran’s total diluted shares outstanding as of Dec. 31.
The transaction is expected to close in the fourth quarter of 2015 and add about 30 cents per share to UnitedHealth’s profit in 2016, the companies said.
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