Prime Therapeutics pays $ 1.35 billion for Magellan Health's pharmaceutical business

Prime Therapeutics pays $ 1.35 billion for Magellan Health’s pharmaceutical business

Prime Therapeutics will pay $ 1.35 billion to acquire Magellan Rx Management, a pharmaceutical organization that manages specialty medications for patients with complex health conditions and works with many state Medicaid programs.

It is the first acquisition by Eagan-based Prime, a Pharma Benefit Manager (PBM) owned by Blue Cross and Blue Shield of Minnesota and 18 other health insurers using the Blue brand.

With the acquisition, Prime Therapeutics will return to operate its own mail order pharmacies and specialty drug distribution facilities.

“This is a very different strategy for us and will make Prime a much stronger full-service pharmaceutical organization,” Ken Paulus, Prime Therapeutics CEO and President, said in an interview. “We are growing substantially. This acquisition will increase our footprint by approximately 50%.”

Prime employs approximately 4,700 people, including approximately 2,600 in Minnesota. Magellan Rx has approximately 2,700 employees.

The acquired business will continue to operate as an autonomous unit. Even so, Paulus said he believes the deal “will increase employment in Minnesota quite substantially.”

Magellan Rx Management is a division of Magellan Health. In January, Magellan Health was acquired by St. Louis-based health insurer Centene Corp. in a $ 2.2 billion deal.

Pharmacy Benefits Managers (PBMs) negotiate drug prices with manufacturers and create pharmacy networks to define the cost structure of drug benefits within health insurance plans.

Magellan Rx has experience handling a subset of drugs known as specialty pharmaceuticals, Paulus said, which are more expensive drugs for complex conditions. In many cases, patients receive the drugs through infusions.

Internal management of specialty drugs allows Prime to better control an expense that drives up drug costs, he said.

Prime operated its own specialty pharmacy distribution centers and mail order pharmacies prior to the 2017 launch of the Walgreens joint venture called AllianceRx Walgreens Prime. Walgreens bought Prime’s 45% ownership stake for an undisclosed amount on December 31st.

“Pharmacy accounts for about 30% of the total health care costs in the United States,” Paulus said. “So, it’s no small deal. Our job is to help our nation manage that 30% and it’s growing substantially. It’s part of the reason we’re making this move, this acquisition. It’s to help our patients. , members, health professionals and the health plans we work with manage those staggering costs. “

Additionally, Magellan Rx has full-service PBM capabilities and has become a state Medicaid plan provider in 28 states and the District of Columbia.

Over the past decade, many Medicaid programs have become suspicious that health insurers hired to run managed care programs for beneficiaries were not passing on all the savings that PBMs negotiated with drug manufacturers and pharmacies. As a result, Medicaid programs have turned to providers such as Magellan Rx to manage the pharmacy benefit independently of health insurers, Paulus said.

“The reason for the split is to create a little bit of – avoid conflict of interest if you want,” he said.

One practice that has troubled Medicaid directors and policymakers has been “pricing spread,” in which PBMs reimburse pharmacies for drugs but then charge state Medicaid programs and health plan customers a higher price for drugs. same drugs. Paulus said neither Prime nor Magellan Rx engage in spread pricing. Companies are committed to transparency with their tariffs, he added.

Prime Therapeutics was the sixth largest PBM in the country in 2021 with about 4% of the market, according to the Drug Channels Institute. The group estimates that three large PBMs linked with for-profit health insurers – CVS Health / Caremark, Cigna / Express Scripts and Optum Rx – control approximately 80% of the market.

The UnitedHealth group, based in Minnetonka, owns Optum Rx and UnitedHealthcare, the nation’s largest carrier.

Prime Therapeutics is a private, for-profit company owned by non-profit insurers Blue Cross and Blue Shield. Last year, the company claims it processed more than 400 million pharmacy requests.

Magellan Rx Management ran into trouble this year when it took over pharmacy benefits management for the Medicaid program in California. Patients have complained of widespread problems filling prescriptions. Paulus said the situation has since been kept under control.

In February, the Magellan pharmacy unit announced plans to deliver drugs to patients’ homes this year via drone technology.

“We’re all trying to find new ways to get these drugs into an individual’s home,” Paulus said. “Magellan has been very innovative in testing new ideas on how to deliver those drugs … I think it will be part of our future.”

The deal is expected to close in the fourth quarter.

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