With One Billion Prescriptions, UnitedHealth Prescribes Future PBM Growth

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UnitedHealth Group (UNH), buoyed by growth potential of its expanding pharmacy benefit business, raised its earnings outlook with the coming addition of a much larger drug management operation.

The nation’s largest health insurer raised its net earnings outlook for 2015 to between $6.25 to $6.35 per share, up from $6.15 to $6.30, thanks to new revenues and profits from its larger pharmacy benefit management (PBM) business. UnitedHealth within the next two weeks will close on its $12.8 billion acquisition of Catamaran Corp. (CTRX) and dramatically increase the number of prescriptions UnitedHealth’s OptumRx business fills to more than 1 billion.

But Larry Renfro, UnitedHealth’s vice chairman and chief executive officer of the company’s Optum business, said the larger PBM will be more than just “filling prescriptions” but pursue a “comprehensive whole person approach that integrates data, information, analytics and clinical care insight to support care treatments and compliance.”

UnitedHealth’s larger PBM, which is growing from its management of 600 million annually prescriptions today, will add $11 billion from the company’s previous outlook to $154 billion in annual revenue.

“In pharmacy care services, there is a clear market need for a more integrated, patient-centered, cost-sensitive offering,” Renfro told analysts and investors this morning.  “We are committed to creating a next-generation pharmacy care services company. The addition of Catamaran accelerates our efforts significantly.”

UnitedHealth expects its PBM to compete with the likes of other standalone drug management businesses like Express Scripts (ESRX) and the Caremark unit of (CVS).

The completion of UnitedHealth’s acquisition and coming larger PBM comes at a time when drug makers have launched expensive new treatments such as Hepatitis C pills made by Gilead Sciences (GILD) and Abbvie (ABBV) that cost more than $1,000 per pill. PBMs are negotiating exclusive deals with drug makers in an effort to bring the costs of these pills down.

More broadly, Renfro said the larger PBM will enter into an arena that will include more specialized drugs. Specialty pharmacy is a hot area given drug makers are increasingly launching more expensive medicines that require patients have more guidance in how to take them to manage their illnesses.

“We needed scale and that’s what we’re going to have,” Renfro said of the addition of Catamaran to the UnitedHealth business.

Insurers are suddenly interested in adding pharmacy benefit management to their portfolios. Aetna (AET), which earlier this month agreed to buy rival Humana (HUM), said the combined company will create a standalone PBM that would become a money-maker serving private employers and government health plans like Medicare and Medicaid.

Source: Forbes