Radar On Market Access: Centene to Bolster Pharmacy Services with Magellan Deal
January 19, 2021
In addition to creating “one of the nation’s largest behavioral health platforms,” Centene Corp. will add another pharmacy-related asset to its portfolio with its recently announced $2.2 billion proposed purchase of Magellan Health, Inc, AIS Health reported.
The deal, unveiled on Jan. 4, will deliver 2 million PBM members and 16 million medical pharmacy lives to Centene. The transaction creates “additional value across our pharmacy capabilities,” Centene Chief Financial Officer Jeff Schwaneke said during a Jan. 4 conference call. “This is a large and significant market….We have invested in this area in recent years given its attractive growth opportunities, most recently with the addition of PANTHERx.”
In addition to creating “one of the nation’s largest behavioral health platforms,” Centene Corp. will add another pharmacy-related asset to its portfolio with its recently announced $2.2 billion proposed purchase of Magellan Health, Inc, AIS Health reported.
The deal, unveiled on Jan. 4, will deliver 2 million PBM members and 16 million medical pharmacy lives to Centene. The transaction creates “additional value across our pharmacy capabilities,” Centene Chief Financial Officer Jeff Schwaneke said during a Jan. 4 conference call. “This is a large and significant market….We have invested in this area in recent years given its attractive growth opportunities, most recently with the addition of PANTHERx.”
Centene’s purchase of PANTHERx Rare, LLC, a specialty pharmacy company that focuses on orphan drugs and treatments for rare diseases, closed on Dec. 30.
However, when it comes to integrating its new pharmacy-related holdings, Centene may face some challenges.
During the conference call, Bank of America analyst Kevin Fischbeck asked executives whether they’re worried that Magellan Rx Management could lose managed Medicaid business opportunities in states such as California that are carving out their pharmacy benefits, as it will no longer be a “pure-play PBM.” Centene President, Chairman and CEO Michael Neidorff downplayed such concerns, emphasizing that states’ decisions to carve benefits in and out “are cyclical” and that Magellan will still be able to operate independently once under its acquirer’s umbrella.
Yet in a research note to investors sent after the call, Jefferies analysts David Windley and David Styblo warned about the “risk of customer abrasion” once Magellan is no longer truly independent. “That was a selling point [Magellan] made for all three of its businesses, especially the PBM,” they wrote.
Timothy Epple, a principal at Avalere Health, says that given “the differentiation in how states operate formularies and how states regulate pharmacy benefits, I do think the pharmacy piece of Magellan could be more complex” to integrate than its behavioral health business. “Centene is very state-focused, and you’re basically talking about integrating two assets that likely don’t have perfect overlap in terms of where they’re operating,” Epple adds.
Centene and Magellan expect their deal to close in the second half of 2021, pending approval from regulators and Magellan Health’s stockholders, and other customary closing conditions.
