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Photo: Shana Novak/Getty Images

In two separate transactions, insurer Centene is divesting two of its pharmacy businesses, Magellan Rx and PANTHERx Rare. The company has signed two definitive agreement, and will sell the former to Prime Therapeutics and the latter to a consortium of the Vistria Group for a combined total of about $2.8 billion.

Centene framed the moves as the next step in its ongoing portfolio review. They follow the company’s plan, announced last year, to exit the pharmacy benefit management (PBM) space. 

“Magellan Rx is a valuable asset, and under different ownership we believe it will continue to thrive as a next-generation pharmacy solutions organization,” said Centene CEO Sarah London by statement. “Likewise, PANTHERx is a leader in rare and specialty pharmacy, and we are confident this transaction will position the company to effectively grow while ensuring patients get the critical, specialized care they deserve.”

WHAT’S THE IMPACT

Magellan Rx is a pharmacy solutions organization with capabilities in specialty drug management, Medicaid administration and comprehensive pharmacy benefits management. Centene acquired Magellan Rx in January 2022 as part of its acquisition of Magellan Health.

The sale of Magellan Rx is subject to federal antitrust clearance, regulatory approvals and other customary closing conditions and is expected to close in the fourth quarter of this year.

PANTHERx, meanwhile, is one of the largest and fastest growing specialty and rare pharmacies in the U.S., which Centene acquired in December 2020.

Its sale is subject to the same conditions, but is expected to close sometime in the next two to four months.

Centene intends to use the majority of the net proceeds from the sales to repurchase stock, and the balance to reduce debt.  Each of the transactions is expected to be neutral to slightly accretive to Centene’s adjusted earnings per share in the 12-month period post-closing.

THE LARGER TREND

It was only in January that Centene closed on its acquisition of Magellan Health. The acquisition was intended to allow Centene to provide increased access to behavioral healthcare, citing the ongoing trend of Americans struggling with mental or behavioral health issues. There was no talk at the time of divesting Magellan’s pharmacy benefits business.

The goal of the transaction was twofold: providing comprehensive and integrated healthcare, and generating value for partners and shareholders. Centene originally signaled its intent to snag Magellan in January 2021 in a deal valued at an estimated $2.2 billion.

The companies said the deal would enable better health outcomes at lower total medical costs via integrated solutions, and create opportunities to grow Centene’s specialty care business with enhanced services, new product development and additional third party relationships.

Centene expects the transaction to deliver $50 million in annual net cost synergies projected by the second full year. The net synergies are in addition to the cost-reduction plan of $75 million already initiated by Magellan.
 

Twitter: @JELagasse
Email the writer: [email protected]



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