UnitedHealth Group Inc. is getting much bigger with a $12.8 billion deal to expand its prescription-drug benefit management business.
UnitedHealth’s stand-alone pharmacy-benefit management unit, OptumRx, announced Monday that it is acquiring suburban Chicago’s Catamaran Corp in an all-cash transaction. The deal, which is expected to expand Optum’s number of prescriptions under management to 1 billion a year, will close in late 2015, pending regulatory and shareholder approvals.
The Minnetonka, Minn.-based for-profit insurer agreed to pay $61.50 per share to buy Catamaran, a 27 percent premium over stock prices before the news broke Monday morning. Catamaran stock soared on the news; the shares closed Monday up $11.51, or 23.8 percent, to $59.83. Shares of UnitedHealth Group rose $2.99, or 2.5 percent, to $121.
UnitedHealth is known to the public primarily as a large health insurer, but its OptumRx division has rapidly grown in recent years in the niche of pharmacy-benefit management, known in the industry as PBM. PBM is the business of managing the pharmaceutical side of an insurance plan, including deciding which drugs are covered and what pharmacies or mail-order services beneficiaries may use to get them.
Prescription drugs are some of the fastest-rising components of health-insurance costs, and the companies that manage their coverage have quickly grown into huge corporations, particularly since the passage of Medicare’s prescription-drug benefit in 2003.
Acquiring Catamaran, the nation’s fourth-largest PBM, will nearly double OptumRx’s PBM business.
“In 2015 Catamaran expects to fulfill more than 400 million prescriptions which, combined with OptumRx’s roughly 600 million annual scripts, will enable the combined entity to be a competitive force in the PBM industry,” UnitedHealth’s news release about the deal said.
OptumRx had revenue of about $32 billion last year, while Catamaran had revenue of $21.6 billion. Catamaran was formed in the 2012 merger of SXC Health Solutions and PBM Catalyst Health Solutions. Express Scripts Holding Co., based in St. Louis, is the biggest provider of pharmacy-benefit services, followed by CVS Health Corp.
“Catamaran’s capabilities are impressive and their leadership team has delivered the fastest growth in the industry,” Larry Renfro, Optum’s chief executive, said in a statement. “We believe the combination of the two companies will create a unique offering in the industry unparalleled by current participants.”
A news release from UnitedHealth said Catamaran’s “industry-leading” technology platform will combine well with OptumRx’s data and analytics capabilities. The result will be a company expected to combine patients’ demographic, lab, pharmaceutical, behavioral and medical treatment data in new ways to enable better medical-decision making and cause patients to better adhere to doctors’ orders.
Mark Thierer, Catamaran’s chairman and chief executive, will become CEO of the combined OptumRx and Catamaran. Timothy Wicks, the current chief executive of OptumRx, will become president.
UnitedHealth Group Inc. is the largest publicly traded corporation in Minnesota by revenue, with $122.5 billion.