UnitedHealth Group Inc. (NYSE:UNH), the largest health insurer, is planning to buy Catamaran Corp for a deal valued at $12 billion. United is making this deal so as to boost its pharmacy benefit business and put it in a better place to compete against rivals like Express Scripts Holding Co. United Health stated that it will pay $61.50 per share and the payment will be made in cash. The pricing by United Health represents a premium of 27% over the current prices.
America has the largest healthcare costs in the world. This ballooning industry has seen the cost of healthcare go up steadily; all this directly affects the workings of health insurance companies like United Health.
UnitedHealth Group Inc. (NYSE:UNH) is a provider of health insurance policies and thus drugs is a major cost component for the company.. The move to buy Catamaran will help it get better prices for expensive drugs. The PBM’s role is that of an intermediary between the end users and the manufacturers of drugs. The current move will help United health in getting better deals from drug companies selling expensive medicines, it will also make United health a leader in PBM industry.
Employers are looking to cut prescription costs and pharmacy benefits managers (PBM) administer drug benefits for the employer at a cheaper rate, helping them get health plans for less. The deal will provide United Health, with leverage to negotiate better, with pharmacy companies for a better deal.
In America, drug prices have seen a rise of 12% in 2014 primarily due to a new and expensive cure of Hepatitis C, which though expensive, cured the recipient, with little to no side effect. Based on past experiences, the insurance company is worried about drug prices going up again after the coming of a new class of medicines to treat high cholesterol.
The deal will also increase the share of United Health in PBM market to 20% from the current 15% according to analyst Jennifer Lynch.