Drugstore giant Rite Aid has agreed to buy pharmacy benefits manager (PBM) Envision Pharmaceutical Services (EnvisionRx) for $2 billion, a deal which would better position the company to compete in the evolving healthcare industry.
Rite Aid will acquire EnvisionRx from private investment firm TPG, in exchange for $1.8 billion in cash and $200 million in Rite Aid stock, or approximately 27.9 million shares. The deal also includes the value of an expected future tax benefit of $275 million.
The acquisition would better position Rite Aid, the number three drugstore chain in the US by sales, to compete with other drugstore giants, such as CVS Health Corp, which acquired PBM Caremark Rx Inc. in 2006 for $21 billion. Such mergers are meant to create efficiencies and reduce drug prices.
PBMs process prescriptions for the groups that pay for drugs and use their size to negotiate with manufacturers and pharmacies to help manage costs, especially for high-priced specialty drugs. This was seen with Express Scripts, which was able to negotiate with AbbVie for the cost of its hepatitis C drug Viekira Pak from its listing price of $83,319 to roughly $60,000.
EnvisionRx, which is expected to bring in revenues of approximately $5 billion this year, provides both transparent and traditional PBM options through its EnvisionRx and MedTrak PBMs, respectively, as well as pharmacy-related services to clients nationwide. The company offers fully integrated mail-order and specialty pharmacy services through Orchard Pharmaceutical Services, access to the nation’s largest cash pay infertility discount program via Design Rx, and a national Medicare Part D prescription drug plan through Envision Insurance Company’s EnvisionRx Plus product offering.
“The acquisition of EnvisionRx meaningfully expands our health and wellness offerings, enhancing our ability to provide a higher level of care to the patients and communities we serve,” said John Standley, Chairman and CEO of Rite Aid. “With the addition of EnvisionRx, we will create a compelling pharmacy offering across retail, specialty and mail-order channels, enabling us to deliver cost-effective solutions to employers and health plans while driving growth and creating long-term value for our shareholders. We also look forward to welcoming EnvisionRx’s proven management team and talented associates to Rite Aid.”
Both companies’ Boards of Directors unanimously approved the transaction. The companies said that the transaction is expected to close in September. Following the closing, EnvisionRx will operate as a wholly owned subsidiary of Rite Aid led by EnvisionRx’s CEO Frank Sheehy and current management.
“Combining our comprehensive suite of pharmacy benefit management services with Rite Aid’s established retail healthcare platform is a natural fit that is increasingly preferred by plan sponsors,” said Sheehy. “Together, we see tremendous opportunities to provide new and existing customers with an integrated healthcare offering that will build upon the company’s strong existing platform.”
Following the announcement, Rite Aid shares rose nearly nine percent in premarket trading.
Source: Rite Aid