Mergers & Acquisitions

Startups Oscar Health, Bright Health Exit Markets & Tighten Belts

Startup insurers Oscar Health, Inc. and Bright Health Group, Inc. have decided they will no longer sell individual and/or family plans in certain states after this year. Ari Gottlieb, a principal at consulting firm A2 Strategy Group, tells AIS Health that those are signs the companies are looking to stem large losses and shore up their businesses as their stock prices fall and raising additional capital becomes harder.

Gottlieb says he anticipates Cigna Corp, which invested in Oscar earlier this year, could buy the company as soon as the end of the year. The fate of Bright remains unknown, although Gottlieb does not see Oscar, Bright or the two other publicly traded startup insurers (Alignment Healthcare and Clover Health Investments Corp.) becoming profitable anytime soon. Gottleib says Cigna may buy Bright also.

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Humana Doubles Down on Primary Care Clinic Investments

Humana Inc. has become the latest insurer to increase its investment in building de novo primary care clinics, perhaps finding that while building is more effective than buying, opening clinics on a broad scale is a costlier proposition than first thought.

The insurer on May 16 said it had established a second joint venture with Welsh, Carson, Anderson & Stowe (WCAS) to further expand its value-based, senior-focused primary care clinics. (Hg Capital Partners and WCAS share control of MMIT, the parent of AIS Health.) The deal will provide up to $1.2 billion of additional capital for the development of approximately 100 new payer-agnostic clinics operated by Humana subsidiary CenterWell between 2023 and 2025. The expansion follows an earlier agreement that is currently deploying up to $800 million of capital to open 67 clinics by early 2023 and support ongoing operations, Humana added. WCAS will have majority ownership of the joint venture, while Humana will have a minority stake.

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News Briefs: Oscar Leaves Arkansas, Colorado

Oscar Health, Inc. will cease operations in Arkansas and Colorado at the end of this plan year. Chief Financial Officer Scott Blackley defended the decision by saying “they’re really small” markets for the firm in response to a question from Goldman Sachs analyst Nathan Rich during the startup insurer’s latest earnings call, according to the Motley Fool. He added that “they don’t have a significant or even close to material effect [on profits.] There is a benefit though from just reducing…compliance work.” The firm has yet to post a profit, prompting criticism from managed care insiders.

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News Briefs: TG Therapeutics Withdraws Pending Applications for Ublituximab/Ukoniq Combo

TG Therapeutics, Inc. said April 15 that it voluntarily withdrew its pending Biologics License Application (BLA)/supplemental New Drug Application (sNDA) for the combination of ublituximab and Ukoniq (umbralisib) for the treatment of adults with chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma. The company said it made the decision based on updated overall survival data from the UNITY-CLL Phase III trial. The company also said that it voluntarily withdrew Ukoniq from sale for two indications: (1) for adults with marginal zone lymphoma who have received at least one anti-CD20-based regimen, and (2) for adults with follicular lymphoma who have received at least three prior systemic therapies. The FDA gave the drug accelerated approval for those indications on Feb. 5, 2021. On Feb. 3, 2022, the company disclosed that the FDA was investigating a possible increased risk of death with Ukoniq based on initial findings from the UNITY clinical trial. The FDA had scheduled an April 22 meeting to discuss the sNDA for the combination therapy, as well as Ukoniq’s accelerated approvals. Following TG Therapeutics’ withdrawal of the BLA/sNDA and Ukoniq’s existing indications, the agency cancelled the meeting. The FDA is expected to make a decision on the BLA for ublituximab in relapsing forms of multiple sclerosis by Sept. 28, 2022.

Centene Plans to Sell Magellan Rx, PANTHERx Rare for $2.8 Billion

Centene Corp. has agreed to sell two of its pharmacy businesses, Magellan Rx and PANTHERx Rare, in separate transactions as part of the insurer’s decision last year to exit the PBM industry.

Prime Therapeutics, a PBM jointly owned by 19 Blue Cross and Blue Shield affiliates, is acquiring Magellan Rx for about $1.35 billion in a deal that’s expected to close in the fourth quarter, while a joint venture of the Vistria Group, General Atlantic and Nautic Partners is buying PANTHERx Rare for $1.45 billion in a deal that’s expected to be completed in the next two to four months.

News Briefs: Centene Will Sell Off Two PBM Assets

As part of its PBM restructuring efforts, Centene Corp. will sell two pharmacy benefits subsidiaries, Magellan Rx and PANTHERx, for approximately $2.8 billion in separate deals. Magellan Rx will be sold to Blue Cross and Blue Shield affiliate-owned PBM Prime Therapeutics for $1.35 billion, while specialty pharmacy PANTHERx will be sold to a group of private equity firms that includes The Vistria Group, General Atlantic and Nautic Partners for $1.45 billion. Both prices are preliminary and the deals must undergo antitrust review. The PANTHERx sale “is expected to close in the next two to four months,” according to a Centene press release, while Magellan Rx “is expected to close in the fourth quarter of 2022.” Centene executives have sought to sell the firm’s PBM assets for some time; new CEO Sarah London said in February that the firm planned to “reduce our three PBM platforms down to one and to focus...[on] clinical member and provider engagement.” After the deals, Centene will retain PBM Envolve Health, presumably to fulfill those functions. Meanwhile, Centene has spent millions to settle claims by state Medicaid programs that it overcharged them for prescription drugs.

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News Briefs: Humana Will Divest Kindred Divisions

Humana Inc. will spin off subsidiary Kindred at Home’s hospice and personal care divisions, with private equity fund Clayton, Dubilier & Rice taking majority ownership in exchange for $2.8 billion cash. Humana will retain a minority share in the new hospice company, which the deal values at $3.4 billion. David Causby, president and CEO of the divisions in question, will lead the new firm. “We are excited by the new strategic partnership structure with Humana and look forward to working closely with CD&R to pursue growth,” said Causby.

Former CMS Administrator Leslie Norwalk resigned from Centene Corp.’s board, citing “the governance process surrounding a recent important decision.” Norwalk in her resignation letter said that process “fell egregiously short of what I and a number of other Board members considered appropriate for making an informed decision.” Norwalk added that the board did not debate the move in question. Her resignation comes shortly after the death of longtime CEO Michael Neidorff, whom Sarah London replaced in March.

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Insurers, Private Equity Firms Are Buying Up Home Care Providers

Health insurers are taking over home health care providers: Most notably, the two largest Medicare Advantage health insurers, UnitedHealth Group and Humana Inc., have each moved to acquire sizable home care providers in the last year. Health care insiders tell AIS Health, a division of MMIT, that home health deals by insurers will become more frequent as plans hope to avoid reimbursing long-term hospital stays by treating members at home — even as private equity firms make inroads into the home health space with an eye toward increasing margins across the industry.

UnitedHealth on March 29 said it plans to spend approximately $6 billion in cash to purchase LHC Group, Inc., a home health care company. In August 2021, Humana completed its acquisition of Kindred at Home, which it has since begun to fold into its CenterWell provider brand. In a recent earnings call, Humana CEO Bruce Broussard said that the carrier is looking for still more home care providers to purchase.

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UnitedHealth, Change Signal Support for Salvaging Their Deal

Both UnitedHealth Group and Change Healthcare Inc. are making it increasingly clear that they aren’t giving up on their proposed $13 billion transaction despite federal regulators’ move to block the deal. However, one antitrust attorney is skeptical that the two companies will ever end up combining.

Bloomberg reported on April 1 that Change “is in advanced talks” to sell its payment integrity business — ClaimsXten — to private equity firm New Mountain Capital for more than $2 billion, citing “people with knowledge of the matter.” The news outlet noted that no deal had yet been struck, and that it is not clear whether the divestment would still proceed if UnitedHealth’s deal to buy Change unravels.

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News Briefs: CMS Will Now Cover and Pay for Over-the-Counter COVID-19 tests for Medicare Enrollees

Effective April 4 and through the end of the COVID-19 public health emergency, Medicare will cover and pay for over-the-counter COVID-19 tests at no cost to people with Medicare Part B, including those enrolled in Medicare Advantage plans. Through the new initiative, beneficiaries can obtain up to eight tests per month from participating pharmacies and health care providers, CMS said on April 4. The agency noted that this is the first time that Medicare has covered an over-the-counter self-administered test at no cost to beneficiaries.

UnitedHealth Group on March 29 said it will spend approximately $6 billion in cash to acquire LHC Group, Inc., a home health care company. If the deal goes as planned, LHC will be folded into UnitedHealth’s Optum division; the companies expect to complete the transaction in the second half of the year. The move will make UnitedHealth a major player in home care and hospice care, positioning it alongside rival Humana Inc., which purchased Kindred at Home last year.