I found it interesting that in WellPoint’s press release announcing an agreement to sell its pharmacy benefit management unit to Express Scripts for $4.7 billion, WellPoint chief executive Angela Braly used the word “integrated” three times.
The deal will “improve our integrated health benefits offerings,” she said, adding that “WellPoint continues to be an industry leader in providing integrated medical and pharmacy benefits.” And for good measure, she said, the deal will “strengthen and accelerate our ability to execute on our integrated health benefits model.”
O.K., I thought “integrated” referred to owning and operating complimentary businesses. So if you’re a health plan and you own a PBM, then you can offer integrated medical and drug benefits.
Or, you can job out mail order drug distribution and back office functions like claims processing, but still claim to be integrated by retaining key functions such as formulary management.
WellPoint will indeed maintain formulary management, medical policy and integrated disease management functions. Express Scripts will take over pretty much everything else, including mail order drug distribution, claims processing and negotiating with drug makers under a 10-year contract.
The price tag, at $4.7 billion, appears to be a good one from WellPoint’s perspective. And as expected, the announcement boosted WellPoint’s share price (up nearly 6% in early trading Monday morning). Of the $3.3 billion WellPoint will receive in cash (the rest in Express stock), it will use $2 billion to repurchase shares—something investors have clamored for.
I’d said in a prior post that if WellPoint sold its PBM the deal would be mostly about boosting its stock price. By retaining some key functions it can still sing the “integrated” song. Meanwhile, standalone PBMs like Express can point to the deal as proof that health plans should carve out rather than integrate drug benefits.
Finally, the price tag (and jolt to WellPoint’s share price) may just be sweet enough to induce other health plans to consider the sale of their PBM units. These things tend to come in waves.
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