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.
The PBM industry has risen rapidly since the creation of Medicare's prescription drug benefit in 2003, and now handles the management of about 4.4 billion prescriptions annually. But the industry has seen rapid corporate consolidation, especially following passage of the Affordable Care Act.
"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.
