The $12.8 billion merger will combine the U.S.' third and fourth largest pharmacy benefit managers. Analysts say smaller PBMs could also merge. Fred Katayama reports.
A billion scripts in a multi-billion dollar deal. UnitedHealth is buying pharmacy benefit manager Catamaran for nearly $13 billion. It'll then combine that with its own PBM unit, OptumRx. The deal will merge the U.S.' third and fourth largest PBMs. It'll mix Catamaran's technology and clients with Optum's medical records and large employer groups. PBMs negotiate with drug makers and drug stores on behalf of their corporate clients to lower costs, and they've been combining to achieve scale. Among the other big mergers: Catamaran and Catalyst Health Solutions; Express Scripts and Medco, and CVS and Caremark. UnitedHealth, which is also a leading health insurer, is paying a 27 percent premium for its rival. It expects the acquisition to add to earnings next year. One thing that could make the merger smoother: Its Optum unit uses Catamaran's platform. FBR Capital Markets analyst Steven Halper said, "The combined company should have better opportunities to win third party business given the increased scale ... It makes sense strategically, financially, and represents an excellent use of capital." UnitedHealth shares adding to its 16 percent gain this year in early trading. Catamaran shares jumped higher, erasing this year's loss. The merger wave may not be over yet. Halper notes there are a lot of small PBMs, and they could consolidate among themselves.