Express Scripts will add management of more than 265 million scripts to the roughly 500 million it currently handles under a definitive agreement to acquire the WellPoint captive pharmacy benefit manager, NextRx.

The acquisition is priced at $4.68 billion, which includes the value of a future tax benefit related to the structure of the transaction.

Announced April 13, the deal includes NextRx and its specialty pharmacy, PrecisionRx Specialty Solutions. The businesses provide pharmacy services to approximately 25 million individuals and make up the fourth largest PBM in the industry.

With the purchase, Express Scripts will move to second place among the large stand-alone PBMs, pulling closer to Medco and moving ahead of CVS Caremark. The acquisition will be the largest for Express Scripts since its failed attempt to buy Caremark two years ago.

WellPoint has been shopping the business around for several months in response to shareholder pressure. Like other major insurers, WellPoint has been struggling with investment losses, shrinking medical membership and rising medical costs.

As part of the deal, Express Scripts has a 10-year contract to provide PBM services to WellPoint. The health insurer will retain control of medical policy, formulary and integrated disease management, while Express Scripts will contribute to pharmacy management and data analytics.

In a same-day call on the announcement, Express Scripts Chairman George Paz highlighted the potential for increasing generic drug utilization and mail-order penetration among WellPoint members as an example of the cost savings possible through the arrangement. WellPoint's mail penetration currently stands at around 10 percent.

He acknowledged that Express Scripts may risk losing a "small" number of clients outside of WellPoint that currently contract with NextRx, but declined to specify what percentage of the PBM's business that represents.

Express Scripts will substantially boost the number of Medicare Part D members it services with the deal. WellPoint manages about 1.9 million Part D beneficiaries through its own plans and for outside clients. Express Scripts' participation in the program has so far been primarily through managing the benefit for clients. The firm does operate its own stand-alone PDP called SAMAScript, but has enrolled only about 65,000 members.

Express Scripts estimates that excluding transaction costs, the acquisition will add $1 billion in earnings before interest, taxes, depreciation and amortization once the integration is complete, which is expected to take 12 to 18 months. The purchase will be financed with cash on hand, committed financing and up to $1.4 billion in Express Scripts stock. It is expected to close in the second half of 2009.

-Cathy Kelly (c.kelly@elsevier.com)

Express Scripts Purchase Deal For NextRx Includes 10-Year PBM Contract With WellPoint

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