Today, Magellan Health, Inc. announced that it has entered into an agreement to acquire 4D Pharmacy Management Systems, Inc. for $55 million in cash.
Magellan said that acquiring the pharmacy benefit manager (PBM) will bring scale and capabilities to Magellan Rx Management and add business in growing markets, such as Medicare, dual eligible and healthcare exchange markets. 4D is a privately held, full-service PBM, serving managed care organizations (MCOs), employers and government-sponsored benefit programs, such as Medicare Part D plans.
“4D will increase Magellan’s PBM scale and provide the company with inroads in Medicare Part D, managed Medicaid, dual eligibles and exchanges,” said Barry M. Smith, chairman and chief executive officer of Magellan Health. “With the capabilities that this acquisition brings, combined with our strong sales momentum, we are well positioned to exceed our long-term growth objective of $2.5 billion of pharmacy revenue by 2018.”
Magellan said that 4D’s commercial book of business is complementary to its own, with a similar high-touch, service-oriented business model, including strong momentum with third-party administrators, consultants and brokers. 4D’s management team, with a track record of execution, will supplement Magellan Rx Management’s existing strong leadership team. 4D currently services about 670,000 members.
“This acquisition is right in line with our pharmacy growth strategy, adding capabilities and expertise that will further enhance the customer experience,” said Robert W. Field, chief executive officer of Magellan Rx Management. “4D’s seasoned leadership team, as well as its experience as a full-service PBM, will strengthen Magellan Rx Management’s offerings to provide additional competition in an area dominated by a few large players.”
Magellan will pay 4D $55 million in cash at closing, with the potential for an additional $30 million based on future milestones, including up to $10 million for the achievement for certain growth targets in the underlying dual eligible membership served by 4D, and up to $20 million for the retention of certain business through 2018.
“Since its inception, 4D has been a family-owned business focused on its clients and employees,” said Jeff Potter, vice president, Business Development and Account Management of 4D. “The Magellan model is a perfect complement to the 4D culture. As a family, we are excited to be part of this larger organization, which will allow us to continue to focus on our clients and employees while bringing additional valuable products and services to market.”
According to the companies, the transaction is expected to close in the second quarter of 2015. Magellan said that it expects 4D to produce approximately $400 million in revenue for the full-year of 2015.
“4D is a great fit within Magellan’s larger pharmacy organization,” said Gerald Borsand, chief executive officer of 4D. “It’s clear that both companies share a desire to bring their clinical expertise and innovation to the market, and together, our capabilities will be leveraged, expanded and enhanced as we seek to grow the business.”
Source: Magellan Health, Inc.
Last updated: 3/18/15; 3:20pm EST