Express Scripts Will Buy WellPoint’s NextRx Prescription Unit

Deal announced today

Pharmacy benefit manager Express Scripts announced this morning it will buy WellPoint’s pharmacy benefit services, including its NextRx unit.

Express Scripts agreed to pay nearly $4.7 billion for the business, including both cash and stock.

Signaling a trend

Many analysts believe that other insurers like WellPoint, such as Aetna and United Health, will take similar steps. As companies face more pressure from the government and lower profits, many will likely choose to divest themselves of their pharmacy benefit manager units.

National health care

More people continue to lose their jobs and their health coverage. That brings health insurance companies’ profits down. Additionally, health insurance companies have been warned that they will face huge pressure to comply with new government regulations. The Obama administration is pushing for more national health coverage, as he hopes to abolish the days when people need payday loans to cover a visit to a clinic or emergency room.

Why comply?

Obama has said that the alternative to compliance from large, private health insurers is for the government to open its own national program. This would directly compete with private insurers.

As is the case with Express Scripts, pharmacy benefit managers stand to gain from deals like the one with WellPoint. The companies will have more clout when negotiating prices with drug makers for clients.

About the companies

NextRx services 32 million people through its client relationships with various health care plans, according to the New York Times. Both Express Scripts and WellPoint say the deal is solid, but a few years ago a different company won a bid that Express Scripts was thought to have won at the last minute. From The New York Times:

Nearly two and a half years ago, Express Scripts and CVS were locked in takeover battle to acquire Caremark Rx. In its bid for Caremark, which was nearly twice its size, Express Scripts offered $26 billion, slightly topping CVS’s offer. But Express Scripts conceded that its bid would have faced more antitrust hurdles, and CVS’s bid was ultimately accepted.