UnitedHealth Group to buy Catamaran for a striking deal of $12.8 billion

By | March 31, 2015
Unitedhealth acquisition

On Monday, Minneapolis- based UnitedHealth Group. Inc (UNH) announced that it would soon purchase pharmacy benefits manager Catamaran Corp for a deal valued around $12.8 billion. Two pharmacy benefits manager are joining hands to negotiate better deals with pharmaceutical producers, a move that could be assumed to bring down drug prices for consumers.

Unitedhealth acquisition

Catamaran was started in 2012 after the merger of SXC Heath Solutions and PMB Catalyst Health Solutions and helps healthcare plans reduced prescription drug costs. The company would be folded into UnitedHealth’s OptumRX pharmacy care services unit.

UnitedHealth acquiring Schaumberg would gain a control over more than 1 billion prescriptions per year that are dispensed. UnitedHealth’s OptumRx unit was already the third-largest player in the close to $300 billion business of managing prescription-drug benefits for Americans.

Ana Gupte, health care analyst of Leerink Partners said, “It is a good thing for the consumers. We’ve had a lot of drug price issues, even beyond the wave of specialty drugs. Even within the existing branded and generics, the unit-price increases have been fairly significant.”

Shares of Catamaran jumped 24% to $59.83, while UnitedHealth gained 2.5% to $121 after the announcement of the acquisition. It is the biggest acquisition in the health care industry recently, which is in the middle of a surge of deal activity. It also represents a further consolidation of the pharmacy benefits management business. A month ago, Rite Aid, a big pharmacy chain, acquired Envision Pharmaceuticals services for a deal worth $2 billion in cash and stock.

Larry Renfro, chief executive of Optum stated, “We believe this combination will create significant value for health plan, government, third-party administrator and employer customers and, most importantly, the individual customers who depend on us for accurate, affordable and convenient pharmacy benefit products and services.”

In 2016, the deal is expected to add 30 cents per share to UnitedHealth’s net earnings. UnitedHealth plans to finance the acquisition from their current cash resources and new debt. The deal is yet to be approved by the Catamaran’s shareholders and regulators, who may decide after having a in-depth view of the increasingly concentrated industry.

Stock market analysts said the deal provides OptumRX the chance to widen the customer base beyond UnitedHealth Group. However, it was not very clear whether a major portion of the Catamaran’s business would flee off with the deal. Heath insurer Cigma is one of Catamaran’s larger customers, but at the same time its managed-care business is rival of UnitedHealth.