UnitedHealth Group to acquire Catamaran in a $12.8 billion deal
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UnitedHealth offered to pay $61.50 per share of Catamaran, a 27% premium over Friday’s closing price of $48.32.

UnitedHealth offered to pay $61.50 per share of Catamaran, a 27% premium over Friday’s closing price of $48.32.

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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