Will Catamaran plus OptumRx lead to IPO?

UnitedHealth Group Inc.'s acquisition of Catamaran Corp. will alter the dynamics of pharmacy benefits management market and ultimately result in cost savings on prescription drugs for employers, experts say.

By merging Schaumburg, Illinois-based Catamaran with Minnetonka, Minnesota-based UnitedHealth's existing PBM, OptumRx, the $12.8 billion deal will result in a PBM that trails only St. Louis-based Express Scripts Holding Co. and Woonsocket, Rhode Island-based CVS/Caremark Corp. in number of prescriptions.

“By connecting the volume of OptumRX with Catamaran, you now have a very solid No. 3 player in the PBM space behind Caremark and Express Scripts,” said Steven Halper, New York-based senior vice president of equity research of health care information technology, managed care and pharmaceutical services at FBR Capital Markets & Co.

Ritu Malhotra, Chicago-based vice president and national pharmacy benefits practice leader at the Segal Group Inc., said the combined entity will foster greater competition.

“I think this is a great thing for the industry,” Ms. Malhotra said. “With the consolidations that have happened over the past few years, we have started to get into a dynamic where the PBM industry is top heavy. We needed more viable players to push for better pricing.”

Mr. Halper said larger PBMs can negotiate better pricing from drugmakers as well as reduced dispensing fees at pharmacies.

“The leverage is double-edged; you can get savings on both sides,” he said.

Ms. Malhotra said the benefits of greater scale extend to service levels.

“It's not just about pricing,” she said. “Our clients have been having more challenges maintaining consistent service levels from both the account management side as well as customer experience.”

Mr. Halper said UnitedHealth Group ultimately may spin off the combined entity to avoid the perception that the “Chinese Wall” between its PBM and health insurance products is not high enough.

“This deal makes their PBM better able to stand on its own, and one of the problems that Optum has had is that it is owned by United,” he said. “Perception can trump reality. So, over time, to be the true No. 3, they will have to be independent.”

UnitedHealth declined comment beyond its initial announcement of the purchase.