Caremark shareholders approve $27 billion CVS bid

After a months-long takeover <br>battle between CVS and Express <br>Scripts, last week Caremark <br>shareholders backed a buyout <br>offer from CVS. / LANDOV

NASHVILLE, Tenn.—Shareholders for pharmacy benefit manager Caremark Rx Inc. last week approved a $27 billion buyout offer from drug giant CVS Corp., ending a months-long takeover battle with PBM Express Scripts Inc.

Woonsocket, R.I.-based CVS and Nashville, Tenn.-based Caremark first decided to join in November 2006, with CVS agreeing to pay $21 billion in a deal that observers at the time said could result in lower prescription drug prices for employers due to the combined company's greater leverage in price negotiations with drug manufacturers (BI, Nov. 6, 2006).

Then, in early December, St. Louis-based Express Scripts put forth a $26 billion proposal, saying a union with Caremark would create an "industry-leading PBM."

That offer touched off a contentious takeover struggle that resulted in litigation by Express Scripts and in sweetened offers from both companies.

With the deal approved by shareholders, Caremark and CVS "now have an historic opportunity to define and lead the continuing evolution of the pharmaceutical services industry," said Mac Crawford, Caremark's chairman, chief executive officer and president, in a statement. The merger still faces regulatory approval.

Caremark buys directly from manufacturers and distributes drugs through 60,000 pharmacies and by mail order. CVS operates nearly 5,400 retail stores with pharmacies. The combined company would be called CVS/Caremark Corp. and will be based in Woonsocket, R.I.

"We have said from the beginning that this combination will transform the way pharmacy services are delivered, enabling consumers to benefit from enhanced health care services and improved outcomes, and for payors to benefit from more effective cost management tools," said Tom Ryan, CVS chairman, president and CEO, in a statement.

For more on issues affecting prescription drug benefits, see the archived Business Insurance Online Executive ForumTM "Hard to Swallow: Why Drug Benefit Costs are So High" at www.BusinessInsurance.com/webinars.