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No. 3 pharmacy benefits manager to swallow No. 4
The agreement by Express Scripts Inc. of St. Louis to acquire WellPoint Inc.’s (Indianapolis) NextRx subsidiaries for $4.7 billion is largely being viewed in a positive light, both strategically and operationally. The combined pharmacy benefits manager (PBM) entity is expected to process some 750 million prescriptions annually, on par with pack leaders Medco (Franklin Lakes, NJ) and CVS Caremark (Woonsocket, RI).
Investment advisory Istock (Salem, OR) notes that “Both parties win here because Express Scripts gets the chance to grow that it missed with Caremark, and WellPoint gets cash from an asset that wasn’t essential to its core business.” Express Scripts was bested in early 2007 by CVS in its acquisition attempt for Caremark, then the No. 2 PBM.
NextRx services the prescription needs of approximately 25 million Americans and manages more than 265 million adjusted prescriptions annually. The transaction includes a 10-year contract for Express Scripts to service WellPoint, an insurer that provides benefits under the Blue Cross Blue Shield brand.
Under the agreement, WellPoint will retain control of medical policy, formulary, and integrated disease management, and will work alongside Express Scripts for pharmacy management and data analytics. For biopharma manufacturers, the action is yet another consolidation of its customer base, with the implication of such retail “megachannels” putting more pricing pressure on the industry.
The transaction is expected to close in the second half of 2009.