optum acquires catamaran

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UnitedHealth to buy pharmacy benefit firm Catamaran for $12.8 billion

By Sneha Banerjee (Reuters) - Health insurer UnitedHealth Group Inc agreed to buy Catamaran Corp in a deal worth about $12.8 billion to boost its pharmacy benefit business as it competes with bigger rivals such as Express Scripts Holdings Co . Pharmacy benefit managers (PBM) administer drug benefits for employers and health plans and run large mail order pharmacies, helping them get better prices from drugmakers. As employers look to cut prescription costs on expensive drugs, the deal with Catamaran will give UnitedHealth's pharmacy benefits unit, OptumRx, the scale to negotiate favorable prices from pharmacy companies. U.S. drug prices rose 12 percent in 2014 due to a new treatment for hepatitis C that cost more than $80,000 but cured almost all recipients with few side effects. Another new class of drugs, to treat high cholesterol, is expected to hit the market in 2015 and has insurers worried about drug costs this year as well. The purchase of Catamaran will increase UnitedHealth's market share to 15 percent to 20 percent of the people who receive their drug benefits through pharmacy benefit managers, BMO Capital Markets analyst Jennifer Lynch said in a research note. With a combined 1 billion scripts annually, UnitedHealth will be about the same size as current industry number two, CVS Health Corp , she added. Catamaran was formed after SXC Health Solutions and PBM Catalyst Health Solutions merged in 2012. UnitedHealth's offer of $61.50 per share represents a premium of 27 percent to Catamaran's Friday close on the Nasdaq. Catamaran's stock was trading at $60.01 premarket on Monday, while UnitedHealth was up nearly 4 percent. The deal "makes sense to us, but admittedly came much earlier than we expected," Jefferies analyst Brian Tanquilut said in a research note. "We had always viewed Catamaran as a compelling asset for companies looking for scale in the PBM sector such as Optum or Walgreens but expected Catamaran to grow the business much further before pursuing a sale." He added that the offer seemed adequate and he did not expect competing bids at this point. The deal value is based on Illinois-based Catamaran's total diluted shares outstanding as of Dec. 31. The transaction is expected to close in the fourth quarter of 2015 and add about 30 cents per share to UnitedHealth's profit in 2016, the companies said. Catamaran Chief Executive Officer Mark Thierer will be CEO of OptumRx and OptumRx CEO Timothy Wicks will become president. (Additional reporting by Caroline Humer in New York; Editing by Savio D'Souza, Saumyadeb Chakrabarty and Meredith Mazzilli)

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UnitedHealth Group acquires Catamaran for $12.8 billion

UnitedHealth Group’s announcement that its free-standing pharmacy care services business, OptumRx, will merge with Catamaran Corp., the fourth largest pharmacy benefit manager in the U.S., makes sense, according to industry experts.

UnitedHealth Group’s announcement that its free-standing pharmacy care services business, OptumRx, will merge with Catamaran Corp., the fourth largest pharmacy benefit manager (PBM) in the U.S., makes sense, according to industry experts.

UnitedHealth Group  plans to acquire  Catamaran for about $12.8 billion in cash, the Wall Street Journal reported.

“This is a smart acquisition well aligned with UnitedHealth’s strategy-increasing their market power, adding to their suite of technology and benefit management offerings, further diversifying their non-risk business, and better positioning them for the rapidly changing post-ACA delivery system and specialty pharmacy market,” says Kip Piper, MA, FACHE, advisor with Sellers Dorsey , a Medicaid consultancy in Washington, D.C.  “It will increase their already formidable leverage in pharma, biotech, and pharmacy price negotiations. UnitedHealth will no doubt take advantage of the wealth of data, IT savvy, and diverse client base Catamaran brings to the deal.”

This merger is consistent with the types of consolidation being seen within the industry, according to Robert Taketomo, PharmD, MBA, president and CEO, Ventegra .

“However, it remains to be seen in this particular case how the desired efficiencies from scale will impact the ability to adapt to a healthcare environment in flux, and how potential channel conflict with health plan clients will be addressed,” Taketomo says.

The agreement calls for the acquisition of Catamaran’s outstanding common stock for $61.50 per share in cash. The transaction is expected to close during the fourth quarter of 2015, subject to Catamaran shareholders’ approval, regulatory approvals and other customary closing conditions. The combination diversifies OptumRx’s customer and business mix, while accelerating its technology leadership and flexible service offerings.

NEXT: Purchase details

The acquisition is expected to be accretive to UnitedHealth Group’s net earnings in the area of $0.30 per share in 2016. UnitedHealth Group plans to finance the acquisition from existing cash resources and new debt. The company affirmed its $6.00 to $6.25 per share earnings outlook assuming the absorption of all merger costs, the ongoing commitment to advance its dividend policy as planned, and a continued but moderated level of share repurchase.

“It is generally acknowledged that most such takeovers result in a transfer of wealth or value from the acquirer's shareholders to the seller's shareholders. As such, it is a good deal for Catamaran,” says Mark O. Dietrich, CPA/ABV, cpa.net , a certified public accounting firm specializing in healthcare valuation, and author of “The Financial Professional's Guide to Healthcare Reform.” “Initial reaction in the market, however, was positive for United with its share price increasing, so perhaps this deal will be an exception.

“Pharmacy costs represent a significant portion of healthcare spending in the United States, reportedly rising 12% last year, and cost control is critical,” Dietrich adds. “The pharmacy chain CVS controls one large PBM, while its competitor Walgreens sold its PBM. At least from a standard view of economics, it would appear to make more sense to have PBMs under insurer control rather than the control of the industry they attempt to manage the costs of.”

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 combined company is expected to deliver an innovative and compelling consumer and payer services offering that will link demographic, lab, pharmaceutical, behavioral and medical treatment data to engage individuals to make better decisions as they seek the best, most effective care and improve compliance with pharmaceutical use and care protocols.

Given the business imperatives of post-Affordable Care Act policy and market environment, super low cost of capital, large corporate cash reserves, the increasing power of data and technology, and intense pressures on pricing and cost efficiency, the industry can expect more M&A activity in many segments of healthcare, according to Piper. 

“The marketplace is ripe for further vertical and horizontal consolidations in the drug supply chain and beyond,” Piper says.

“Consolidation leads to fewer choices for the users of PBMs, which of course include managed care executives,” Dietrich says. “Pharmacy costs and formularies are one element of a managed care plan's product design and may contain features regarded as competing with other managed care plans. For plans presently using, for example, United's OptumRx, a competing plan may be using Catamaran. Now, both competing managed care plans would be serviced by the same PBM.”

NEXT: OptumRx's approach

OptumRx’s advanced Clinical Synchronization approach connects pharmacy and care management systems, processes and teams to create deeper insights for higher quality, more consistent and compliant patient outcomes and savings for individuals and plan sponsors. Synchronization presents the entire patient health profile, rather than discrete pieces of an individual’s profile – a distinctive and critically important capability given the growth in U.S. spending on specialty pharmaceuticals.

Catamaran offers retail pharmacy network management, mail service pharmacy, pharmacy claims management and patient-centric specialty pharmacy services to a broad client portfolio, including health plans and employers, as well as healthcare information technology solutions to the industry. In 2015 Catamaran expects to fulfill more than 400 million prescriptions which, combined with OptumRx’s roughly 600 million annual scripts, will enable the combined entity to be a competitive force in the PBM industry. Enhanced purchasing and administrative improvements from the combination are expected to drive substantial value, with the majority of savings expected to directly benefit clients and individuals through reduced costs for prescriptions and enhanced pharmaceutical services.

Both companies have distinctive, rapidly growing specialty pharmacy services businesses. The combined organization will help customers manage the complex costs and outcomes as this portion of the pharmaceutical market expands from an estimated $100 billion in revenues in 2014 to potentially $400 billion annually by 2020.

“With pharmaceutical costs rising rapidly and the increasing prevalence of expensive specialty drugs targeting rare conditions, pharmacy costs are likely to represent an increasing share of healthcare spending in the future,” Dietrich says. “The PBM companies that control access to millions of insureds will play a critical role in determining pricing and insurance premiums.”

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UnitedHealth Group to Buy Catamaran in $12.8 Billion Pharmacy Benefits Deal

By David Gelles

• March 30, 2015

Two pharmacy benefits managers are combining forces in an effort to negotiate better deals with pharmaceutical makers, a move that could in theory lead to lower drug prices for consumers.

A unit of the UnitedHealth Group said it had agreed to acquire the Catamaran Corporation in an all-cash deal worth nearly $13 billion, the companies announced on Monday.

UnitedHealth will pay $61.50 a share for Catamaran, a 27 percent premium over Friday’s closing price of $48.32 a share. It is the latest big acquisition in the health care industry, which is in the midst of a surge of deal activity. And it represents a further consolidation of the pharmacy benefits management business.

Last month, Rite Aid, a big pharmacy chain, acquired Envision Pharmaceutical Services , for $2 billion in cash and stock.

Catamaran, which is based in Schaumburg, Ill., will be combined with UnitedHealth’s pharmacy services business, OptumRx. Catamaran manages more than 400 million prescriptions each year on behalf of 35 million people — or about one in every five prescription claims in the United States.

The combined company will face off against other big pharmacy benefits managers, including Express Scripts and CVS Caremark.

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

UnitedHealth said the deal would add 30 cents a share to its net earnings in 2016. UnitedHealth plans to finance the acquisition from existing cash resources and new debt.

The deal is subject to approval by Catamaran’s shareholders and regulators, who may take a close look at an increasingly concentrated industry.

But even as it consolidates, the business is growing, too. Managing pharmacy benefits is expected to quadruple to a $400 billion market in 2020, up from $100 billion last year.

Mark Thierer, Catamaran’s chairman and chief executive, will become chief executive of OptumRx, while Timothy Wicks, the current chief executive of OptumRx, will become president.

“Our board of directors carefully considered a variety of strategic options and unanimously concluded that this combination is clearly in the best interests of our shareholders,” Mr. Thierer said. “Together, we believe we will have the talent, scale, technology resources and innovative spirit.”

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UnitedHealth Group buying Catamaran pharmacy benefits manager for $12.8 billion

Catamaran serves about 25 million americans with retail pharmacy network management, mail-order pharmacy, claims management and other services..

Photo of UnitedHealth Group Corporate Headquarters from Facebook

UnitedHealth Group, the nation’s largest insurer, on Monday said it would acquire Catamaran, the country’s fourth-largest pharmacy benefits manager, for $12.8 billion. Under terms of the deal, Schaumburg, Illinois-based Catamaran will merge with OptumRx, the drug management division of UHG’s highly profitable technology and services subsidiary Optum.

In the $12.8 billion deal, expected to close by the end of the year, UHG is paying $61.50 a share, 27 percent more than Catamaran’s closing stock price on March 27.

“Catamaran’s capabilities are impressive and their leadership team has delivered the fastest growth in the industry,” said Larry Renfro, chief executive officer of UGH’s Optum, in a statement. “Optum’s longstanding business relationship with Catamaran as a technology partner means we operate on the same adjudication platform, simplifying integration and giving us confidence our combined organizations will quickly become an innovative force moving the pharmacy care services marketplace forward.”

Mark Thierer, chairman and CEO of Catamaran, said the company’s board considered a range of options for its future and unanimously decided to accept UHG’s offer.

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“The creation of a differentiated, channel-agnostic delivery model will provide payers and individuals a broader portfolio of services and a deeper product offering while aggressively focusing on managing costs,” said Thierer, Catamaran’s CEO since 2006.

Catamaran was founded in 1993 as Systems Xcellence in Toronto, gradually growing through the 2000s after relocating to suburban Chicago and a handful of acquisitions. After buying Catalyst Health solutions in 2012 for $4 billion, the company was renamed to Catamaran.

[Also: Tracking 2015 mergers and acquisitions ]

Renfro said Catamaran and Optum already had similar business strategies. OptumRx uses “clinical synchronization” to connect pharmacy and care management systems, as well as specialized teams to pursue “more consistent and compliant patient outcomes and savings for individuals and plan sponsors,” such as large employers. That approach is particularly important, Renfro said, “given the growth in U.S. spending on specialty pharmaceuticals,” which is driving a wave of drug spending that could top $500 billion by 2020.

Catamaran serves about 25 million Americans with retail pharmacy network management, mail-order pharmacy, pharmacy claims management and patient-centric specialty pharmacy services to health plans and employers. This year, the company will fill about 400 million prescriptions, and when combined with OptumRx, the new company will fill more than 1 billion scripts each year.

Currently, specialty pharmaceuticals account for only 1 percent of all U.S. prescriptions but more than 20 percent, or $100 billion, of national drug spending, and that could rise to $400 billion by the end of the decade, according to UHG. 

Twitter: @AnthonyBrino

UnitedHealth Group to acquire Catamaran in a $12.8 billion deal

Health insurer UnitedHealth Group Inc. has announced that it has reached an agreement to purchase Catamaran Corp in a deal worth about $12.8 billion to promote its pharmacy benefit management, as it competes with bigger rivals such as Express Scripts Holdings Co.

As part of the deal, Catamaran, the fourth largest pharmacy benefit manager in the U.S., will be integrated into UnitedHealth Group’s OptumRx unit, the industry’s third-largest player and part of the Optum health-services arm of the health-care giant.

Pharmacy-benefit management companies like Catamaran administer drug benefits, working with employers and insurers to negotiate prescription drugs at a lower rate from pharmaceutical groups and pharmacists. They also maintain a patients list of covered drugs, handle mail orders or complex treatments and often oversee patients’ drug use.

As employers seek to reduce prescription costs on high price drugs, the deal with Catamaran will give UnitedHealth’s pharmacy benefits unit, OptumRx, the scale to arbitrate fair prices from pharmacy companies.

In 2014, U.S. drug prices surged 12 percent as a result of a new treatment for hepatitis C that cost more than $80,000 but cured almost all beneficiaries with few side effects. Another new class of drugs, to cure high cholesterol, is expected to be launched in 2015 and has insurers worried about drug costs this year as well.

On Monday, UnitedHealth offered to pay $61.50 per share of Catamaran, a 27% premium over Friday’s closing price of $48.32. UnitedHealth plans to fund the deal from existing cash reserves and new debt. The all-cash deal, which is subject to Catamaran shareholders’ approval is expected to close during the fourth quarter of 2015.

Schaumburg, Ill.-based Catamaran’s stock price surged 24 percent on Monday, while Minnetonka, Minn, based UnitedHealth Group’s shares rose by more than 2 percent.

The deal could even force other health mergers and acquisitions between Express Scripts the country’s largest PBM, and Walgreens Boots Alliance, the nation’s largest drugstore chain.

CVS also owns one of the nation’s biggest pharmacy chains, while Envision RX, a small pharmacy benefit manager, recently announced plans to be acquired by national drug store chain Rite Aid.

Pharmacy companies are able to use scale to negotiate reasonable prices. Previously, Express Scripts was able to procure a huge discount for a crucial hepatitis C drug from AbbVie Inc., and has said it will use its size to gain discounts for cholesterol drugs and cancer drugs in the future.

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OptumRx and Catamaran Are Latest Players to Consolidate in the PBM Market – How Will Your Pharmacy Be Affected?

UnitedHealth announced an agreement to acquire Catamaran for about $12.8 billion in cash, and is planning to merge the pharmacy benefit manager into its own, free-standing pharmacy benefits business, OptumRx. This deal is expected to close in the fourth quarter of 2015, after shareholder approval, regulatory approval and other customary closing conditions.

This deal is expected to combine the strength of Catamaran’s 400 million prescriptions with OptumRx’s 600 million annual prescriptions to rival the larger players like CVS/Caremark and Express Scripts. The merger is also expected to combine Catamaran’s technology platform with the data and analytics capabilities of OptumRx.

This merger has certain similarities to the Express Scripts and Medco $29.1 billion merger in 2012. This deal created one company filling a combined 1.4 billion prescriptions per year, and Express Scripts used Medco’s technology platform as well. At the time of the deal, Express Scripts and Medco were the largest and third-largest pharmacy benefits managers, respectively. The deal was scrutinized for eight months by the FTC for potential antitrust implications after being approved. However, the effect for pharmacies was that Express Scripts and Medco maintained separate contracts and networks for at least 18 months post-merger.

For specialty and compounding pharmacies, this may mean that the combined PBM may push for decreased reimbursements and may seek to force more patients through mandatory, in-house mail order and specialty pharmacies. In addition, programs initiated and implemented by Catamaran may not carry forward to the merged entity.

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Catamaran to be Acquired by OptumRx

March 31, 2015 - WorkCompWire

New York, NY – OptumRx and Catamaran Corporation [NASDAQ: CTRX, TSX: CCT], a provider of pharmacy benefit management (“PBM”) services and technology solutions, recently announced they have agreed to combine. OptumRx is UnitedHealth Group’s [NYSE: UNH] free-standing pharmacy care services business.

The agreement calls for the acquisition of Catamaran’s outstanding common stock for $61.50 per share in cash. The transaction is expected to close during the fourth quarter of 2015, subject to Catamaran shareholders’ approval, regulatory approvals and other customary closing conditions. The combination diversifies OptumRx’s customer and business mix, while accelerating its technology leadership and flexible service offerings.

The acquisition is expected to be accretive to UnitedHealth Group’s net earnings in the area of $0.30 per share in 2016. UnitedHealth Group plans to finance the acquisition from existing cash resources and new debt. The company affirmed its $6.00 to $6.25 per share earnings outlook assuming the absorption of all merger costs, the ongoing commitment to advance its dividend policy as planned, and a continued but moderated level of share repurchase.

Upon closing, Mark Thierer, Catamaran’s chairman and chief executive officer, will serve as chief executive officer of OptumRx and Timothy Wicks, the current chief executive officer of OptumRx, will become president. Jeff Park, who currently serves Catamaran as executive vice president, Operations, will become the chief operating officer for OptumRx. Jeffrey Grosklags, currently the chief financial officer of OptumRx, will continue in that role.

OptumRx and Catamaran will create significant value for their combined customer base beyond the scale and enhanced service resulting from integration of their businesses. 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 combined company is expected to deliver an innovative and compelling consumer and payer services offering that will link demographic, lab, pharmaceutical, behavioral and medical treatment data to engage individuals to make better decisions as they seek the best, most effective care and improve compliance with pharmaceutical use and care protocols.

OptumRx’s advanced Clinical Synchronization approach connects pharmacy and care management systems, processes and teams to create deeper insights for higher quality, more consistent and compliant patient outcomes and savings for individuals and plan sponsors. Synchronization presents the entire patient health profile, rather than discrete pieces of an individual’s profile – a distinctive and critically important capability given the growth in U.S. spending on specialty pharmaceuticals.

Catamaran offers retail pharmacy network management, mail service pharmacy, pharmacy claims management and patient-centric specialty pharmacy services to a broad client portfolio, including health plans and employers, as well as health care information technology solutions to the industry. In 2015 Catamaran expects to fulfill more than 400 million prescriptions which, combined with OptumRx’s roughly 600 million annual scripts, will enable the combined entity to be a competitive force in the PBM industry. Enhanced purchasing and administrative improvements from the combination are expected to drive substantial value, with the majority of savings expected to directly benefit clients and individuals through reduced costs for prescriptions and enhanced pharmaceutical services.

Both companies have distinctive, rapidly growing specialty pharmacy services businesses. The combined organization will help customers manage the complex costs and outcomes as this portion of the pharmaceutical market expands from an estimated $100 billion in revenues in 2014 to potentially $400 billion annually by 2020.

Larry Renfro, chief executive officer of Optum said, “Catamaran’s capabilities are impressive and their leadership team has delivered the fastest growth in the industry. We believe the combination of the two companies will create a unique offering in the industry unparalleled by current participants. Optum’s longstanding business relationship with Catamaran as a technology partner means we operate on the same adjudication platform, simplifying integration and giving us confidence our combined organizations will quickly become an innovative force moving the pharmacy care services marketplace forward. We believe this combination will create significant value for health plan, government, third party administrator and employer customers and, most importantly, the individual consumers who depend on us for accurate, affordable and convenient pharmacy benefit products and services.”

Mark Thierer, chairman and chief executive officer of Catamaran, said, “Our Board of Directors carefully considered a variety of strategic options and unanimously concluded that this combination is clearly in the best interests of our shareholders. The creation of a differentiated, channel-agnostic delivery model will provide payers and individuals a broader portfolio of services and a deeper product offering while aggressively focusing on managing costs. Together, we believe we will have the talent, scale, technology resources and innovative spirit to build the most modern, effective and consumer-focused PBM in the history of the industry.”

Source: Catamaran

StarTribune

Unitedhealth buys pharmacy-benefit manager catamaran for $12.8b.

The nation's largest health insurer, Minnetonka's United­Health Group Inc., will have more clout to push back against high drug prices with a $12.8 billion merger announced Monday.

UnitedHealth is acquiring Schaumberg, Ill.-based Catamaran Corp. in a move to gain control over how more than 1 billion prescriptions per year are dispensed. UnitedHealth's OptumRx unit was already the third-largest player in the nearly $300 billion business of managing prescription-drug benefits for Americans.

"It's a good thing for the consumer," said Leerink Partners health care analyst Ana Gupte. "We've had a lot of [drug] price issues, even beyond the wave of specialty drugs. Even within the existing brandeds and generics, the unit-price increases have been fairly significant."

Analysts and investors cheered the merger news because drug costs are a large and growing share of overall health care spending. Huge pharmacy-benefit management companies have fought against sky-high drug prices, and that battle is likely to become much more intense with the launch of a new generation of cancer drugs carrying six-figure price tags.

Pharmacy benefit managers, known in the industry as PBMs, are in the business of managing the pharmaceutical side of an insurance plan, including deciding which drugs are covered and what pharmacies or mail-order services beneficiaries use to get them. The companies can also be a potent force to negotiate bulk discounts on drugs, as was evident last year with pressure to lower costs for a $90,000 hepatitis C medication.

"We view the transaction as a positive for [UnitedHealth] as it cements Optum's position as a top player" in the PBM industry, Wells Fargo senior analyst Peter Costa wrote in a note to investors Monday.

By adding No. 4 player Catamaran, UnitedHealth's OptumRx will control 23 percent of the market, up from 14 percent. That puts it on par with the industry's biggest player, Express Scripts, which controls 30 percent of the market, and CVS/caremark's 25 percent share, according to Deutsche Bank analysts. The next-biggest company has 8 percent.

IBISWorld, which studies the industry, estimates that the $287 billion PBM market is on pace for 4.3 percent annual growth through 2020. "Growth prospects for PBMs are strong," the firm's report on the industry earlier this month said. "The 2010 Patient Protection and Affordable Care Act will expand prescription drug coverage over the next five years, which will help bolster prescription drug use and industry revenue as a result."

Investors approve

UnitedHealth on Monday agreed to pay Catamaran shareholders $61.50 per share, a 27 percent premium over Friday's closing price. The deal is expected to add 30 cents per share to UnitedHealth's earnings in 2016, following an expected closing at the end of 2015, pending shareholder and regulatory approvals.

Investors applauded the deal, sending shares of both companies higher. Catamaran stock jumped 24 percent on the news, and UnitedHealth Group gained 2.5 percent, closing at $121.

OptumRx had revenue of about $32 billion last year, while Catamaran had revenue of $21.6 billion.

UnitedHealth executives declined an interview request, but Optum's chief executive Larry Renfro said in a statement that the combination of the two companies would create "a unique offering in the industry unparalleled by current participants."

UnitedHealth Group is principally known for being the nation's largest health insurer, and its OptumRx business differentiates itself in the market by being able to inform its decisionmaking by analyzing claims on 114 million commercial and Medicare-covered beneficiaries. Catamaran, meanwhile, is known for its advanced technology platforms.

The combination is expected to allow company analysts to study patients' demographic, lab, pharmaceutical, behavioral and medical treatment data in new ways to improve medical decisionmaking and let patients better follow doctors' orders, the companies said in a statement.

Possible fallout

Stock analysts said the deal gives OptumRx a welcome ability to broaden its base beyond UnitedHealth Group customers. But it wasn't clear whether a good-sized chunk of Catamaran's business would flee with the deal. Health insurer Cigna is one of Catamaran's larger customers, but its managed-care business competes with UnitedHealth.

Costa's analysis noted that Cigna may try to pull out of its Catamaran deal, although Leerink's Gupta had a different take after talking with Cigna officials.

"They don't seem to show any concern or any interest in cleaving from Catamaran as a result of this," she said. "As long as they can share in some of the better economics from scale, they would be happy to stay with them."

Mark Thierer, Catamaran's chairman and chief executive, will become CEO of the combined OptumRx and Catamaran. Timothy Wicks, the current chief executive of OptumRx, will become president.

UnitedHealth Group is the state's largest publicly traded corporation by revenue. It reported revenue of $130.5 billion in 2014. In 2013, its revenue exceeded that of Target and Best Buy combined, according to the most recent Star Tribune 100 analysis of the state's top companies.

Joe Carlson • 612-673-4779

Twitter: @_JoeCarlson

Joe Carlson writes about medical technology in Minnesota for the Star Tribune.

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OptumRx To Acquire Catamaran In $12.8 Bln Cash Deal

OptumRx, the free-standing pharmacy care services business of health insurer UnitedHealth Group, Inc. ( UNH ), agreed Monday to acquire pharmacy benefits manager Catamaran Corp. ( CTRX , CCT.TO ) for $61.50 per share in an all-cash deal valued at about 12.8 billion. The deal is expected to be accretive to UnitedHealth Group's net earnings in the area of $0.30 per share in 2016.

"Catamaran's capabilities are impressive and their leadership team has delivered the fastest growth in the industry. We believe the combination of the two companies will create a unique offering in the industry unparalleled by current participants," Optum CEO Larry Renfro said.

The offer price of $61.50 per share represents a 27.3 percent premium over Catamaran's closing price of $48.32 on Friday. UnitedHealth said it intends to fund the deal from existing cash resources and new debt. The deal, primarily subject to Catamaran shareholders' approval, is expected to close during the fourth quarter of 2015.

Following the closure of the deal, Catamaran Chairman and CEO Mark Thierer will serve as CEO of OptumRx, while current OptumRx CEO Timothy Wicks will become president. Jeff Park, current Catamaran executive vice president of operations, will become the chief operating officer of OptumRx, while current OptumRx CFO Jeffrey Grosklags will continue in the role.

"Our Board of Directors carefully considered a variety of strategic options and unanimously concluded that this combination is clearly in the best interests of our shareholders. The creation of a differentiated, channel-agnostic delivery model will provide payers and individuals a broader portfolio of services and a deeper product offering while aggressively focusing on managing costs," Thierer stated.

Catamaran offers retail pharmacy network management, mail service pharmacy, pharmacy claims management and patient-centric specialty pharmacy services to a broad client portfolio, including health plans and employers, as well as health care information technology solutions to the industry.

Further, UnitedHealth also affirmed its $6.00 to $6.25 per share earnings outlook for fiscal 2015. On average, 24 analysts polled by Thomson Reuters expects the company to report earnings of $6.20 per share for the year. Analysts' estimates typically exclude special items.

Catamaran said in 2015 it expects to fulfill more than 400 million prescriptions which, combined with OptumRx's about 600 million annual scripts, will enable the combined entity to be a competitive force in the PBM industry.

The combined entity will help customers manage the complex costs and outcomes as this portion of the pharmaceutical market expands from an estimated $100 billion in revenues in 2014 to potentially $400 billion annually by 2020.

UNH closed Friday's regular trading session at $118.01, up $1.76 or 1.51% on a volume of 2.56 million shares. In the past 52-week period, the stock has been trading in a range of $73.61 to $121.53.

For comments and feedback contact: editorial@rttnews.com

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M&A Deal Summary

Optumrx acquires catamaran, on march 30, 2015, optumrx acquired healthcare services company catamaran for 12.8b usd, acquisition highlights.

• This is OptumRx’s 1st transaction in the Healthcare Services sector.
• This is OptumRx’s largest (disclosed) transaction.
• This is OptumRx’s 1st transaction in the United States.
• This is OptumRx’s 1st transaction in Illinois.

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OptumRx specializes in the delivery, clinical management and affordability of prescription medications and consumer health products.

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Optum Acquires Steward Health Care’s Extensive Physician Practice Network

I n a strategic move by Steward Health Care, the company has agreed to divest its extensive physician network across the nation to Optum, a branch of the giant UnitedHealth Group. This decision is part of Steward Health Care’s efforts to consolidate its financial status.

Steward Health Care, which currently runs nine health care centers in Massachusetts, is under the watchful eye of Gov. Maura Healey, particularly given the locations of these facilities in several of the state’s underprivileged areas.

With over 30 hospitals under its umbrella nationwide, the Dallas-headquartered Steward Health Care requires approval from the Massachusetts Health Policy Commission before it can finalize its transaction with Optum.

Although powerless to veto the deal directly, the Commission can forward its findings to the state’s Attorney General, the Department of Public Health, or other relevant agencies for additional measures, if necessary.

The terms and financial details of the agreement have not been disclosed publicly. Optum is set to take over a Steward subsidiary that incorporates primary care physicians and various other healthcare practitioners in a total of nine states.

David Seltz, the Executive Director of the Health Policy Commission, expressed the panel’s dedication to conducting an in-depth and evidence-based review of healthcare market transitions, aiming to bring vital insights to the public domain.

He highlighted that the Commission would assess the potential effects of the proposed sale on healthcare cost, quality, accessibility, and fairness. The transaction is put on hold until the Commission, along with state and federal antitrust authorities, have completed their scrutiny.

Seltz emphasized the significance of the proposed merger, considering its implications for healthcare provision and expense, both within Massachusetts and on a national scale.

Requests made to Steward Health Care and Optum for comment were not immediately acknowledged.

Democratic Massachusetts House Speaker Ronald Mariano stressed that the presence of the Commission’s review does not hinder state and federal antitrust bodies from safeguarding patient rights and cost-effectiveness.

After submission of all necessary details about the sale, the Commission will have a 30-day window to evaluate the possible impacts of the transaction. Should there be a prediction of significant effects on healthcare costs or market operations, the Commission can initiate a more detailed cost and market impact review.

Democratic U.S. Sen. Edward Markey has voiced that for-profit entities involved in healthcare must recognize the outcomes of their actions on patients and the community.

Optum has the task of proving its capability to manage heightened accountability in ensuring healthcare access, Markey explained during a press conference in Boston. He hopes to see Optum prioritize cost-reduction and patient welfare.

Markey, who heads the HELP Subcommittee on Primary Health and Retirement Security, mentioned his intent to hold a congressional hearing in Boston on the topic of for-profit companies’ influence on healthcare availability.

U.S. Sen. Elizabeth Warren expressed her primary concern is ensuring the continuity of Steward’s hospitals in Massachusetts.

Warren criticized Steward’s history of “gross profiteering and mismanagement” and cautioned against any decision that would allow the organization to potentially exploit the state further.

FAQs About Steward Health Care’s Deal with Optum

What is Steward Health Care?

Steward Health Care is a hospital operator that runs a network of hospitals and physician practices.

Who is acquiring Steward Health Care’s physician network?

Optum, a subsidiary of UnitedHealth Group, is acquiring Steward Health Care’s physician network.

What does the deal between Steward Health Care and Optum entail?

The deal involves Optum acquiring a subsidiary of Steward Health Care, which includes the company’s primary care doctors and clinicians in nine states. The financial details have not been disclosed.

What are the legal requirements before the deal can be finalized?

The transaction must be reviewed by the Massachusetts Health Policy Commission and possibly by state and federal antitrust authorities.

What are the concerns surrounding the deal?

Concerns include potential impacts on healthcare access, quality, costs, and equity. There is also worry about preserving the continuity of Steward’s hospitals in Massachusetts and their management.

Steward Health Care’s decision to sell its vast physician network to Optum is a strategic choice to improve its financial stability and streamline its operations. While the terms of the deal remain undisclosed, the acquisition holds significant implications for healthcare access and costs in Massachusetts and beyond. The transaction is subject to rigorous review to ensure adherence to legal and regulatory standards and to assess its overall impact on healthcare delivery. Government officials and the Health Policy Commission are paying close attention to ensure that the interests of the public are maintained, with a firm call for the preservation of healthcare provisions and the prevention of harmful market practices.

Why UnitedHealth Group's Optum is eyeing Steward physician group

UnitedHealth Group’s Optum is poised to solidify its position as the largest physician employer, but its proposal to acquire Steward Health Care’s physician group will likely meet stiff regulatory scrutiny.

Optum Care, a subsidiary of Optum, plans to buy Stewardship Health , the physician arm of the ailing for-profit Steward health system , according to regulatory filings with the Massachusetts Health Policy Commission. If the proposal goes through, Optum would add thousands of physicians across nine states to its rapidly growing network of 90,000 doctors . Steward could use the proceeds to pay down debt and reimburse vendors and landlords after missing months of payments.

Related: UnitedHealth Group's Optum to buy Steward physician group

“We continue to anticipate transactions like this where vertically integrated entities have more control over the healthcare dollar,” said Rick Kes, a healthcare senior analyst at accounting firm RSM. “However, especially when you have entities that are already getting a lot of news and are part of congressional and state-level discussions, these kinds of deals will get a lot of regulatory attention.”

Here’s what to know about the proposal, Optum and Steward.

What does the Optum-Steward proposal entail?

Optum and Steward said in regulatory filings the proposed acquisition would bolster the physician group’s operations and recruitment of primary care physicians, as well as other providers, to eastern Massachusetts.

Optum already provides management services to Massachusetts practices Atrius Health and Reliant Medical Group, the company noted in the filings.

Under the proposed transaction, Optum would acquire all of the issued and outstanding stock in Stewardship Health. The filings did not include a purchase price or the number of physicians employed by Stewardship. Neither Optum nor Steward replied to requests for comment.

Dallas-based Steward does not expect the proposed acquisition to reduce service offerings, workforce or clinical autonomy, the organization said in filings.

How does Steward fit into Optum’s growth strategy?

Optum has built a massive physician network, allowing its parent company UnitedHealthcare to control more parts of the system.

Optum CEO Dr. Amar Desai said in November  physician employment was up almost 30% from the beginning of 2023. Optum will continue to grow its provider network to treat UnitedHealthcare enrollees, said Stephen Shortell, a retired health policy and management professor at University of California, Berkeley.

“Steward has a lot of the care management capabilities that Optum looks for in their acquisitions ,” he said, drawing comparisons to Optum's $4.3 billion DaVita Medical Group acquisition . “Unlike private equity , Optum is in it for the long run.”  

Insurers   including UnitedHealthcare have grown revenue by sending cash not spent on medical and quality improvement expenses to clinicians they own, financial analysts and insurance experts said. This offers insurers a workaround  to the Affordable Care Act's medical loss ratio policy, physician employment experts said. 

The medical loss ratio requires health plans spend 80% of individual and small group premiums and 85% of large group and Medicare Advantage plans on quality improvement and healthcare services. Otherwise, they must repay consumers the difference.

What will regulators review in the Optum-Steward proposal?

State and federal lawmakers will likely review potential market overlap between Optum and Steward’s physician networks, as well as how the proposed acquisition would affect the viability of Steward’s nine Massachusetts hospitals, antitrust experts and researchers said.

For instance, if Optum takes over the Steward physician practices and decides to pull doctors out of a hospital like St. Elizabeth’s Medical Center in Brighton, Massachusetts, it could be the death knell for the hospital, said John McDonough, a public health professor at Harvard University. 

“That's a lot of power to give to a single company,” he said. “Those kinds of choices are quite possible and are really hard to detect from a regulatory perspective.”

UnitedHealth Group and Optum are  already under a Justice Department investigation , which was first reported by the Wall Street Journal. That includes a review of UnitedHealth Group's pending $3.3 billion acquisition of Amedisys , a Baton Rouge, Louisiana-based hospice and home healthcare provider, according to the Journal.

UnitedHealth Group has been roundly criticized following the Feb. 21 cyberattack on the claims processing technology of its subsidiary Change Healthcare , which  dented many providers’ cash flow .

Sen. Elizabeth Warren (D-Mass.) noted the investigation in a statement Tuesday as she raised concerns with the the Optum-Steward proposal.

“Optum, a UnitedHealth Group subsidiary, is already the largest employer of physicians in the country — controlling over 10% of American doctors — which means this deal raises significant antitrust concerns in Massachusetts and nationally,” she said in the statement. “The Justice Department is already reportedly investigating UnitedHealth’s relationship with its Optum health services arm.”

Steward’s latest plan “raises more serious questions about the future of the Massachusetts healthcare system,” after years of Steward's “gross profiteering and mismanagement,” Warren added.

Optum may test what’s known as the “failing firm defense,” which is when merging parties say a proposed transaction should be allowed because an organization would otherwise close. However, that theory is narrow in scope, according to merger guidelines, which federal regulators updated in December .

Even so, that argument will likely bolster Optum and Steward’s case, said Abiel Garcia, an antitrust lawyer at law firm Kesselman Brantly & Stockinger.

Steward ran into financial trouble  after it converted from a small Catholic health system in Massachusetts to a sprawling hospital chain. The transition was fueled by investment from private equity firm Cereberus Capital Management and real estate investment trust Medical Properties Trust .

The Massachusetts Health Policy Commission will have 30 days to determine if it will pursue a cost and market impact review of the proposed Optum-Steward deal. 

What’s Steward’s next move?

Steward, which recently closed or announced plans to close hospitals in Texas and Massachusetts, has been looking to sell more facilities .

On March 11, a Steward spokesperson said in a statement the system has received “strong interest”  in its Massachusetts hospitals.

In Tuesday’s regulatory filings, Steward said it plans to submit documents with the Health Policy Commission for “certain acute care hospitals and other provider operations in the next 12 months.”

“Steward Health Care is working with state officials and others to transition ownership of the Massachusetts hospitals in a way that everyone agrees is best for patients, our employees and the Commonwealth,” the spokesperson said.

Lauren Berryman contributed.

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