UnitedHealth Group Inc. has agreed to acquire Schaumburg, Ill.-based Catamaran Corp. for $12.8 billion in cash and debt, Bloomberg reports today. The deal is a 27 percent premium over Catamaran’s closing price on Friday and would be UnitedHealth’s largest acquisition to date.

Catamaran is the nation’s fourth largest pharmacy benefits manager and will be absorbed into UnitedHealth’s OptumRx unit—the nation’s third largest PBM. Mark Thierer, Catamaran’s chairman and CEO, will become CEO of OptumRx.

The combined company will provide pharmacy benefits services for 65 million people, compared to 90 million for Express Scripts and about 65 million for CVS Health Corp. The acquisition marks the second of its kind this year; last month Rite Aid Corp. agreed to buy EnvisionRX for $1.8 billion in cash and $200 million in Rite Aid stock.

Our Take: The deal will allow UnitedHealth to expand beyond its current base and provides added leverage in negotiating pricing discounts from drug manufacturers. What is uncertain is how its payer clients will feel about the acquisition: Catamaran earns about a third of its revenue from rival Cigna Corp.

“We expect the combination of Catamaran and OptumRx will provide significant value” to Cigna, a UnitedHealth spokesman told Bloomberg. “We respect this relationship and look forward to discussing the benefits of this transaction with them and all of Catamaran’s current business partners.”

Analysts say the move represents a broader effort by PBMs to reign in drug prices from new specialty drugs like Solvadi, Gilead’s Hepatitis C treatment that gained notoriety for its $80,000 price tag when it launched last year. “You have to scale,” Thierer told The Wall Street Journal. “This makes the business more competitive overall.”

Expect UnitedHealth to leverage its newfound negotiating power beyond pricey specialty drugs.

Leave a comment