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UnitedHealth-Catamaran deal all about negotiating better drug prices

$12.8B buy could trigger wave of mergers and acquisitions

UnitedHealth's $12.8 billion acquisition of pharmacy benefit manager Catamaran is all about combatting high drug prices, the Washington Post reported.

Insurers increasingly struggle to cover expensive medications to treat conditions such as HIV, hepatitis C and multiple sclerosis. Drug prices increased nearly 12 percent in 2014--and high costs strain the ability of the entire healthcare system to afford these critical medical advances, the Post reported.

That's where pharmacy benefit management (PBM) firms such as Express Scripts, CVS Health and the combined Catamaran-OptumRx come into play. (OptumRx is UnitedHealth's existing PBM business.)

CVS already puts pressure on pharmaceutical companies to lower the cost of cholesterol drugs that will likely increase to $12,000 per year, Bloomberg reported. Express Scripts is expected to do the same for cancer, multiple sclerosis and rheumatoid arthritis treatments, the Post said. Drugs to combat lung and skin cancer could cost more than $150,000 per year, Bloomberg said.

It's not unheard of for insurers to negotiate with pharmaceutical companies. Both Aetna and Humana struck deals with Gilead for discounts on hepatitis C drugs, FierceHealthPayer previously reported. The deals should help the payers improve their financial outlook for 2015.

But sheer size will help UnitedHealth negotiate even better deals, the Post said, as more patients means more potential customers. The combined Catamaran-OptumRx will cover close to 65 million people, making it the third-largest PBM firm in the nation, Bloomberg said. Express Scripts covers about 90 million, and CVS covers more than 65 million. Express Scripts and CVS used their clout to negotiate price deals with hepatitis C drug makers AbbVie and Gilead, respectively.

Meanwhile, Reuters reported that the UnitedHealth-Catamaran deal, which will likely close in the fourth quarter of this year, should trigger additional consolidation among payers and PBM firms. Anthem, Aetna and Cigna have in recent years signed deals with Express Scripts, CVS and Catamaran, respectively, while Humana opted not to sell its Medicare PBM business. But that may not be enough to compete with UnitedHealth, Reuters said.  

For more:
here's the Washington Post story
read the Bloomberg article
- check out the Reuters article

Related Articles:
UnitedHealth to buy pharmacy benefit manager Catamaran for $12.8B
Aetna, Humana deals with hep C drug maker help improve 2015 outlooks
Insurers, states strike hepatitis C deals with pharmaceutical companies
Benefits plans excluding more drugs as costs rise
Drug prices expected to rise nearly 12% this year
Insurers figure out ways to cover pricey treatments