Centene Boosts Specialty Drug Expertise With Pair of Deals

Centene Corp. celebrated the end of 2020 by closing on its acquisition of specialty pharmacy PANTHERx Rare, LLC on Dec. 30, then started 2021 with an agreement to acquire Magellan Health, Inc. The deals will strengthen Centene’s expertise in the specialty pharmacy space, particularly in the burgeoning orphan drug arena, by bringing onboard PANTHERx, an experienced company that’s shown remarkable growth over the past 10 years.

Centene and PANTHERx did not disclose terms of the deal, which was unveiled Dec. 15.

Centene says it will acquire Magellan — a
FORTUNE 500 company specializing in behavioral health, specialty care and pharmacy — for $95 per share in cash for a total enterprise value of $2.2 billion. The companies said they expect the deal, which was unveiled Jan. 4, to close in second-half 2021. The agreement, which was unveiled at press time, will “enhance[e] the scale of Centene’s pharmacy platform with leading capabilities in specialty drug management,” according to a press release on the planned acquisition. Magellan will bring 2 million PBM members and 16 million medical pharmacy members.

“As the leader in government-sponsored health care, including medically complex populations, having this capability in house enables us to better understand the specialty pharma pipeline, clinical requirements and cost management aspects,” said Centene Chief Financial Officer Jeff Schwaneke during a Jan. 4 conference call to discuss the Magellan transaction.

It also creates additional engagement opportunities that Centene expects will lead to “better adherence rates and ultimately, improved patient outcomes.”

Meanwhile, PANTHERx focuses on rare disease pharmacy, “filling gaps that exist among biopharma, prescribers, and payers,” and it offers services including filling prescriptions, filing paperwork required by insurers, consulting with providers and educating patients and their families about treatment regimens, per its website.

Headquartered in Pittsburgh, PANTHERx launched as PANTHERx Specialty Pharmacy in 2011 with an eye on creating a new specialty pharmacy model: one that focused on needs of people with orphan, or rare, diseases, which are conditions affecting fewer than 200,000 people in the U.S. According to the National Human Genome Research Institute, more than 6,800 such diseases exist, affecting 25 million to 30 million Americans. The firm rebranded in 2019 to underscore its focus on providing high-touch care to people with rare diseases.

Firm Has Undergone Huge Growth

In less than a decade, PANTHERx has grown tremendously. In 2013, it had $2 million in revenue, then $5 million in 2015. That rose to $42.5 million in 2015 — a 13,381% increase since 2012, noted Adam Fein, Ph.D., CEO of Pembroke Consulting, Inc.’s Drug Channels Institute, in a Sept. 20, 2016, post on his Drug Channels blog.

In a Sept. 4, 2019, Drug Channels post on the fastest-growing private specialty pharmacies in 2018, PANTHERx ranked No. 1, with 2018 revenue of $726.1 million, growth of 1,635% from 2015. According to Fein, “As far as I know, PANTHERx holds the record for fastest-growing specialty pharmacy in the industry’s history. Its focus on rare diseases has allowed it to avoid the network access problems that plague other independent specialty pharmacies.”

Most recently, in an April 28, 2020, blog on the top 15 specialty pharmacies, Fein reported that the firm’s 2019 U.S. specialty drug prescription revenue was $1.2 billion, up 65% from 2018.

Centene, which is headquartered in St. Louis, offers both government and commercial health care programs, as well as a variety of related services. According to Centene, PANTHERx and its management team will operate independently under the Envolve Pharmacy Solutions division — formerly known as US Script, Inc., which Centene acquired in 2006 — whose offerings include PBM and specialty pharmacy services to millions of people in the U.S. Presumably, PANTHERx would fall under Envolve’s specialty pharmacy, AcariaHealth, which Centene acquired in April 2013.

“Given the pull that the PANTHERx name generates, Centene is smartly taking an ‘ain’t broke, don’t fix it’ approach,” wrote long-time industry expert and executive editor Bill Sullivan in the Dec. 22 AntonRx Report from Anton Health, LLC, adding that “Acaria has operated seamlessly in the marketplace under its original name since the Centene acquisition.”

“As of 2020, Centene ranked as the largest provider of government-sponsored health plans with roughly 22 million members,” Sullivan pointed out. “Centene ranked No. 42 in the 2020 Fortune 500 list of the largest United States corporations by total revenue.”

The company, he said, has “a history of growth through acquisition” across a wide range of competencies. For example, following its purchase of WellCare Health Plans, Inc. — which was finalized in January 2020 and was one of its largest deals — Centene folded WellCare’s Exactus Pharmacy Solutions into AcariaHealth, Sullivan wrote. And also in December, Centene completed its deal for “a data analytics firm, Apixio, to support its pharmacy and health management operations, to expand Centene’s existing data analytics, and create the ability to document value-based payments. Value-based contracting, already a proof of concept, is thought to be a critical element to payer coverage of ultra-high cost specialty therapies (e.g., rare drugs) in coming years.”

Deal Will Enhance Envolve Visibility, Rep

According to Elan Rubinstein, Pharm.D., “overall PANTHERx brings rare disease clinical competence, manufacturer limited-distribution marketing strength and national specialty pharmacy leadership prestige to Centene, which will enhance the visibility and reputaion of its wholly owned subsidiary Envolve Pharmacy Solutions.”

“In recent years, major insurers and health plans have acquired or developed PBM, specialty pharmacy, mail-order pharmacy and community pharmacy capabilities,” he points out. An evaluation of the specialty drugs that Envolve supplies, as indicated on its website, and those mentioned on the PANTHERx blog reveals only two of the same specialty drugs — Makena (hydroxyprogesterone caproate) and Cosentyx (secukinumab) — he notes.

PANTHERx Will Broaden Drug List

That said, “it is likely that the PANTHERx blog notes only some of the specialty drugs that it supplies. Still, a comparison of these lists demonstrates that PANTHERx brings many limited-distribution specialty drugs to Centene’s Envolve Pharmacy Solutions that Envolve was not previously able to dispense. This is valuable to Centene, because it is difficult and highly competitive for a specialty pharmacy to earn limited-
distribution pharmacy status for a particular drug in a manufacturer’s provider network. PANTHERx has specialty pharmacy certification, as do other specialty pharmacies.” But as of mid-December, PANTHERx was only one of two specialty pharmacies that have Distinction in Rare Diseases and Orphan Drugs from the Accreditation Commission for Health Care, he points out.

PANTHERx “operates in a highly competitive marketplace in which health plans and PBMs control which specialty pharmacies may dispense to their members,” Rubinstein tells AIS Health. With the deal, the companies “will likely dispense specialty pharmaceuticals on a preferred basis for members of Centene-affiliated health plans. Centene and its existing pharmacy assets will provide PANTHERx a stable financial basis from which to continue its growth.”

Rubinstein maintains that PANTHERx “has well-respected pharmacy capabilities and leadership and, based on its ability to access many limited-distribution drugs, has an impressive marketing capability as well. Given how difficult the last few years have been for most independent specialty pharmacies, and even for larger ones — referencing Diplomat’s difficulties prior to its acquisition by Optum — growth in PANTHERx’s limited-distribution drug niche has been quite impressive.”

Sullivan maintained that “the announcement that Centene was doubling down on specialty pharmacy with the PANTHERx deal should not be surprising given Centene’s robust acquisition history. PANTHERx is a ripe acquisition. PANTHERx was ranked as the 12th largest specialty pharmacy in 2019 with $1.2 billion in sales. That is a big hunk of revenue and, in combination with the Acaria specialty pharmacy revenue, creates huge clout in the marketplace especially with manufacturers.”

Drugmakers, he said, are “key to fueling PANTHERx’s revenue engine. PANTHERx opened [its] doors only in 2011 and grew rapidly with an aggressive marketing strategy pursuing new, limited-distribution drugs. These [limited-distribution] deals funneled thousands of new prescriptions to their doors.…In 2020, virtually every FDA specialty drug approval has or will come to market through limited distribution. That’s called being in the right place at the right time.”

Contact Rubinstein at elan.b.rubinstein@gmail.com and Sullivan at Bsullivan0011@gmail.com.

This story was reprinted from AIS Health’s monthly publication RADAR on Specialty Pharmacy. Visit https://aishealth.com/product/specialty-pharmacy.

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