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United HealthCare Buys PBM Catamaran - How the nation's biggest health insurer is fighting higher drug costs
WASHINGTON -- You never have to appear far these days to uncover stories about the rising expenses of prescription drugs. By one count, drug spending jumped 13 % last year, the highest annual boost in more than a decade. And well being insurers have spent...
WASHINGTON -- You never have to appear far these days to uncover stories about the rising expenses of prescription drugs. By one count, drug spending jumped 13 % last year, the highest annual boost in more than a decade. And well being insurers have spent the improved part of the past year warning anybody who'll listen that the new medications will come with high cost tags that will strain the wellness care system's capacity to afford such health-related advances. That adds vital context to news UnitedHealth Group has dropped $12 billion on Catamaran, a pharmacy rewards manager that negotiates with drugmakers and pharmacies to safe greater bargains on behalf of clients. Catamaran adds to UnitedHealth's drug added benefits division, and the acquisition creates what will be the country's third-largest pharmacy added benefits manager (or PBM) behind Express Scripts and CVS Well being, according to Bloomberg.
The acquisition gives UnitedHealth, the largest U.S. overall health insurer, extra negotiating power as wellness insurers continue to place public pressure on how drugmakers value their goods. The most notable instance lately has been the pricing of 3 new hepatitis C medications, which represent vast improvements more than preceding drugs but price at least $84,000. As a ProPublica/Washington Post story revealed Monday, Medicare spent $four.five billion on new hepatitis C drugs in 2014 -- additional than 15 instances what the seniors' overall health care plan paid the prior year on therapies for liver disease.
Medicare is not permitted to negotiate directly with drugmakers, but the PBMs can. And as new competing hepatitis C treatments hit the marketplace late final year, these PBMs scored exclusive bargains with drugmakers to provide their goods. They negotiated undisclosed discounts when also promising a wider swath of patients could obtain the treatments.
Express Scripts, the nation's largest PBM, has mentioned it hopes to exert comparable pressure on drugmakers for new drugs expected to hit the marketplace for complex conditions such as cancer, several sclerosis and rheumatoid arthritis. CVS signaled last month it would stress pharmaceutical corporations on pricing for a new wave of cholesterol drugs. Potentially millions of patients could advantage from these new cholesterol treatments, which are expected to cost anywhere between $7,000 and $12,000, CVS officials wrote in the Wellness Affairs policy journal.
UnitedHealth's acquire of Catamaran also comes just six weeks right after Rite Aid beefed up its PBM organization with a $2 billion acquisition of its own. The typical customer might not know what PBMs are, but they could quickly turn out to be a a lot greater force in the overall health care that they obtain.
· Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico.
Catamaran to be acquired by UnitedHealth unit
(AP) - Schaumburg-based pharmacy benefit manager Catamaran will be acquired by a unit of UnitedHealth Group for about $12.8 billion.
The buyer is OptumRx, which a statement calls "UnitedHealth Group's free-standing pharmacy care services business."
The price of $61.50 a share is a 27 percent premium to Catamaran's closing price March 27, and shares of the pharmacy benefits manager, or PBM, were up 24.2 percent in early trading this morning.
At the deal's closing, Catamaran CEO Mark Thierer is to become CEO of OptumRx. "This combination is expected to create a dynamic competitor in the PBM market by combining the strengths of Catamaran's industry-leading technology platform with the data and analytics capabilities of Optum," the statement said.
The Catamaran deal lets UnitedHealth bet more on growth in drug benefits as the initial surge of new health-insurance customers from Obamacare begins to slow. The biggest U.S. health insurer will combine Catamaran with OptumRX, giving it a broader base of customers.
Optum "has largely been servicing United's captive business," said Ana Gupte, an analyst at Leerink Partners. "They have aspirations to broaden that." Pharmacy benefits managers process claims and run prescription drug plans for insurers, employers and other customers. They help negotiate prices customers and insurers pay for drugs.
OptumRx, based in suburban Minneapolis, fills about 600 million prescriptions annually. Catamaran expects to fill 400 million this year.
The companies said their businesses both have "distinctive, rapidly growing specialty pharmacy services businesses" for a segment of the market that is expected to quadruple from an estimated $100 billion in revenues last year to $400 billion by 2020.
The nation's largest PBM, Express Scripts, filled about 1.3 billion prescriptions last year.
Adding scale will help UnitedHealth bargain harder in in negotiations with drugmakers and pharmacies said Steve Halper, an analyst at FBR.
"They have a lot more clout," Halper said. "You're negotiating with the manufacturers for rebates and pricing with a much larger base."
Express Scripts executives have spoken out frequently about soaring costs from specialty drugs, and the St. Louis company threw its weight into this fight late last year by restricting coverage. It said in December it will no longer cover Sovaldi and Harvoni-two Gilead Sciences drugs that cost more than $80,000 each for a full course of treatment-or Johnson & Johnson's Olysio except under limited circumstances.
Instead, it made AbbVie Inc.'s Viekira Pak the preferred treatment for its patients.
PBMs can make these restrictions in part because of the leverage they get from the millions of customers they represent. Acquisitions have been a key means of growth in the sector for years.
In 2012, Express Scripts became the nation's largest PBM by completing a $29.1 billion acquisition of rival Medco Health Solutions. That same year, Catamaran changed its name from SXC Health Solutions after spending more than $4 billion to buy another PBM, Catalyst Health.
The OptumRx-Catamaran acquisition is the second announced for a drug-benefit manager this year. Rite Aid agreed to buy EnvisionRX last month for $2 billion.
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