INDIANAPOLIS — Express Scripts Inc. stands to gain considerable negotiating clout from its $4.68 billion deal to buy the pharmacy benefits management businesses of health insurer WellPoint Inc., and experts say that could mean savings for those buying prescription drugs.
St. Louis-based Express Scripts said Monday it planned to buy WellPoint’s NextRx subsidiaries in a cash-and-stock deal. Express Scripts is the third-largest pharmacy benefits manager, and the deal likely would push it close to the top stand-alone company, Medco Health Solutions Inc., based on prescriptions managed.
The increased bargaining power that comes from that size should translate into better pricing for existing employer customers and more aggressive pricing for prospective new ones, said David Dross, a principal with the consulting firm Mercer.
That could help employees by lowering copayments for drugs or softening increases in the contributions they have to make to their health plans. But that depends on how or if the employer passes along any savings.
How does this work
Pharmacy benefits managers pay prescription drug claims through large networks of chain pharmacies and independent drug stores. They also manage mail-order businesses that ship drugs directly to patients, a practice that is becoming popular for people who need steady medications to deal with chronic conditions.
Shares of Express Scripts and WellPoint climbed Monday after the deal was announced.
Transaction details
WellPoint will receive at least $3.28 billion in cash and the balance in Express Scripts stock.
The insurer will use about $2 billion of that to buy back shares.
The transaction also includes a 10-year contract for Express Scripts to provide services to WellPoint following the transaction.
Deutsche Bank analyst Scott Fidel said Monday that investors have never given managed-care organizations much value in their stock prices for pharmacy benefits businesses. He said this deal "should help unlock some value for (WellPoint’s) stock.”
Analysts also say Express Scripts should increase the percentage of NextRx business delivered through the mail.
St. Louis-based Express Scripts said Monday it planned to buy WellPoint’s NextRx subsidiaries in a cash-and-stock deal. Express Scripts is the third-largest pharmacy benefits manager, and the deal likely would push it close to the top stand-alone company, Medco Health Solutions Inc., based on prescriptions managed.
The increased bargaining power that comes from that size should translate into better pricing for existing employer customers and more aggressive pricing for prospective new ones, said David Dross, a principal with the consulting firm Mercer.
That could help employees by lowering copayments for drugs or softening increases in the contributions they have to make to their health plans. But that depends on how or if the employer passes along any savings.
How does this work
Pharmacy benefits managers pay prescription drug claims through large networks of chain pharmacies and independent drug stores. They also manage mail-order businesses that ship drugs directly to patients, a practice that is becoming popular for people who need steady medications to deal with chronic conditions.
Shares of Express Scripts and WellPoint climbed Monday after the deal was announced.
Transaction details
WellPoint will receive at least $3.28 billion in cash and the balance in Express Scripts stock.
The insurer will use about $2 billion of that to buy back shares.
The transaction also includes a 10-year contract for Express Scripts to provide services to WellPoint following the transaction.
Deutsche Bank analyst Scott Fidel said Monday that investors have never given managed-care organizations much value in their stock prices for pharmacy benefits businesses. He said this deal "should help unlock some value for (WellPoint’s) stock.”
Analysts also say Express Scripts should increase the percentage of NextRx business delivered through the mail.
by the associated press
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