Tags: Walgreen Catalyst

Walgreen to Sell Pharmacy Benefit Manager for $525 Million

Wednesday, 09 Mar 2011 09:39 AM

Walgreen Co. said Wednesday it is leaving the pharmacy benefits management business, selling that operation to Catalyst Health Solutions Inc. for $525 million in cash and freeing it to focus on its drugstore network, the largest in the United States.

The pharmacy benefits management business, known as Walgreens Health Initiatives, has never approached the size of Caremark, the pharmacy benefits management business of CVS Caremark Corp., which is Walgreen's largest drugstore competitor.

Caremark is the third-largest pharmacy benefits manager in the U.S.

The deal more than doubles Catalyst's size, bringing its total membership to about 18 million members from 7 million. The Rockville, Md., company said it will handle about 165 million prescriptions a year after the deal is complete, compared to about 80 million previously.

Pharmacy benefits managers handle prescription drug plans for health plan sponsors and members. They make money by reducing costs for sponsors and members. One of their chief methods involves encouraging members to fill prescriptions with low-cost generic drugs. PBMs also encourage patients with chronic illnesses to fill their prescriptions through the mail using 90-day orders instead of the traditional 30 days.

Some critics have said the drugstore-PBM combination creates a conflict of interest, as PBMs try to reduce costs and drugstores want to bring in more revenue.

Walgreen, of Deerfield, Ill., said the sale of the Walgreen Health Initiatives unit will be neutral to its profit in its next fiscal year. In addition to its network of 7,689 drugstores, Walgreen still has specialty pharmacy and mail service businesses and runs worksite health centers.

The companies expect to complete the deal by the end of June assuming regulators approve. As part of the deal, Walgreen says it will provide some services to help patients transition to Catalyst. It expects those services to cost it around $40 million. Catalyst agreed to provide PBM services to Walgreen's 244,000 employees and retirees and dependents, and administer the company's prescription savings club.

Walgreen shares rose 60 cents to $42.99 in pre-market trading, while Catalyst shares gained $2.02, or 4.5 percent, to $46.55.

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Walgreen Co. said Wednesday it is leaving the pharmacy benefits management business, selling that operation to Catalyst Health Solutions Inc. for $525 million in cash and freeing it to focus on its drugstore network, the largest in the United States. The pharmacy benefits...
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Wednesday, 09 Mar 2011 09:39 AM
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