(Bloomberg) -- UnitedHealth Group Inc. agreed to buy Catamaran Corp. for about $12.8 billion, bulking up its drug- benefits business to get better negotiating power in talks with pharmaceutical companies over prices.
UnitedHealth will pay $61.50 a share, financing the acquisition with cash and debt, the companies said in a statement. The offer, which would be UnitedHealth’s largest purchase ever, is 27 percent more than Catamaran’s closing share price of $48.32 on Friday.
Companies that provide health insurance to their employees are becoming more reliant on drug-benefit managers to help rein in the rising cost of medications. Express Scripts Holding Co., the biggest in the industry, successfully led a campaign last year to push for discounts on $1,000-a-day treatments for hepatitis C from drugmakers Gilead Sciences Inc. and AbbVie Inc.
The 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 its drug-benefit unit, called 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.”
UnitedHealth rose 4.2 percent to $122.94 in early trading. Catamaran gained 24 percent to $60.03.
The drug-benefits industry gets about $100 billion in annual sales, a figure that may quadruple by 2020, the companies said. Even with the acquisition, Minnetonka, Minnesota-based UnitedHealth will remain third in the industry behind Express Scripts and CVS Health Corp. in revenue, according to data compiled by Bloomberg. Optum covers about 30 million people, while Catamaran represents about 35 million. That compares with 90 million for Express Scripts and more than 65 million for CVS.
Catamaran gets about a third of its revenue from Cigna Corp., a rival to UnitedHealth in the insurancebusiness. By joining with UnitedHealth, Catamaran increases the risk that Cigna will end the relationship to avoid helping one of its chief competitors, Peter Costa, an analyst at Wells Fargo & Co., said in a research note.
“We expect the combination of Catamaran and Optum Rx will provide significant value” to Cigna, Tyler Mason, a UnitedHealth spokesman, said by e-mail. “We respect this relationship and look forward to discussing the benefits of this transaction with them and all of Catamaran’s current business partners.”
Matthew Asensio, a Cigna spokesman, didn’t immediately return a message seeking comment. The company agreed to a 10- year relationship with Catamaran in 2013.
Mark Thierer, Catamaran’s chairman and chief executive officer, will become CEO of OptumRx, and Timothy Wicks, the current CEO, will become president, according to the statement. The purchase is expected to be completed in the fourth quarter of 2015, and will add about 30 cents to UnitedHealth’s earnings per share in 2016, the companies said.
The acquisition is the second announced for a drug-benefit manager this year. Rite Aid Corp. agreed to buy EnvisionRX last month for $2 billion.
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