Expecting future growth in the need for Medicaid pharmacy management services, Magellan Health Services, Avon, Conn., is buying a pharmaceutical benefits administration firm from insurer Coventry Health Care, Bethesda, Md.
Magellan buying benefits outfit from Coventry
Magellan has agreed to buy First Health Services, a Coventry subsidiary based in Glen Allen, Va., for $110 million in cash on hand, pending regulatory approval, in the third quarter of 2009. The healthcare outsourcing firm said growth in Medicaid usage stemming from current economic conditions is creating a financial strain for state budgets and managed-care Medicaid payers. Coventry acquired First Health in 2005, but says the business no longer fits with its long-term market strategy.
In addition to the purchase agreement, Magellan signed a three-year deal to manage Coventrys radiology services and provide oncology management services. The service agreements are contingent on the completed sale of First Health. Coventrys stock price rose almost 1% in the four hours following the announcement, and Magellans stock price rose 1.6% during the same time.
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