UnitedHealth Group has agreed to buy Catamaran Corp., a publicly traded pharmacy benefits manager, for almost $12.8 billion in cash.
Catamaran would become part of OptumRx, UnitedHealth's pharmacy subsidiary. The acquisition reflects UnitedHealth's ongoing commitment to being more than just a health insurer as it pours major investments into its Optum companies.
“Catamaran's capabilities are impressive, and their leadership team has delivered the fastest growth in the industry,” Optum CEO Larry Renfro said. “We believe the combination of the two companies will create a unique offering in the industry unparalleled by current participants.”
The combined pharmacy management entity would become one of the largest in the country, right behind Express Scripts Holding Co. and CVS Health Corp. OptumRx already fills about 600 million prescriptions every year, most of them for patients enrolled in UnitedHealthcare coverage. With Catamaran, that number jumps to 1 billion prescriptions. OptumRx recorded $32 billion in revenue in 2014, the most of any Optum company. Catamaran's revenue totaled $21.6 billion.
“The acquisition makes tremendous strategic sense as the (pharmacy benefit manager) business is a scale business and drives Optum's revenue mix,” Sterne Agee analyst Brian Wright said in a research note Monday.
Financial analysts also believe the deal goes beyond gaining the scale of more pharmacy customers and the leverage to extract lower prices for high-cost drugs, such as those that treat hepatitis C. UnitedHealth executives believe Optum's data analytics component combined with Catamaran's highly regarded technology platform will help predict pharmaceutical costs for specific populations and lead to new drug “use and care protocols.”
“Catamaran and UnitedHealth shared a desire to bring the best data capabilities,” Josh Raskin, an analyst at Barclays Research, said in note to investors “While this will clearly help reduce pharmaceutical costs for UnitedHealth's members, this will likely have a larger long-term impact on medical costs for their populations.”
UnitedHealth is the largest health insurer in the country by revenue, specializing in Medicare Advantage and large group accounts. But Optum has grown its footprint within the Minnetonka, Minn.-based conglomerate over the past few years. In 2014, more than one-third, or $47.7 billion, of the UnitedHealth's $130.5 billion in revenue was attributed to an Optum subsidiary.
The two other Optum subsidiaries, OptumInsight and OptumHealth, work with hospitals, doctors, payers, governments and other employers on consulting, technology and population health. In September, Optum acquired MedSynergies, a physician practice consulting firm.
The Catamaran deal is expected to close by the fourth quarter. UnitedHealth estimates it would boost earnings per share by about 30 cents in 2016. The purchase price of $61.50 is 27% higher than Catamaran's closing price last Friday.
Catamaran CEO Mark Thierer will become CEO of OptumRx once the transaction closes. OptumRx's current CEO, Timothy Wicks, will serve as president.
If the deal doesn't close by the end of this year and is terminated, Catamaran would have to pay UnitedHealth $450 million.