(Reuters) - Express Scripts Holding Co (ESRX.O) said on Tuesday it would buy privately held specialty healthcare benefits manager eviCore healthcare for $3.6 billion to bolster its medical benefits management business amid the threat of losing a major client.
The deal comes as a pre-emptive move with Express Scripts exposed to more competition and the possibility of the pharmacy benefit manager losing Anthem Inc (ANTM.N) and rumored entry of Amazon.com Inc (AMZN.O) into the prescription drug market.
“The deal signals Express Scripts’ desire to remain independent even with the likely Anthem loss,” said Baird analyst Eric Coldwell, adding that the decision may disappoint some who hoped the company would pursue strategic options.
Medical benefits management spending is estimated to be roughly $300 billion annually, Express Scripts said. The acquisition of eviCore would plant the company firmly in the growing market, Leerink analyst David Larsen wrote in a client note.
Express Scripts has a minor presence in medical benefit management, the company’s spokesman Brian Henry told Reuters, and the deal would expand it to get into the market in a “bigger way.”
Bluffton, South Carolina-based eviCore provides healthcare benefits management and administrative services on behalf of clients consisting mainly of commercial health insurers and other third-party payers, including Medicaid and Medicare Advantage plans.
Reuters reported in May that eviCore was exploring a sale or an initial public offering.
The deal is expected to close in the fourth quarter of this year, Express Scripts said, adding that eviCore would operate as a standalone business unit.
Shares of Express Scripts’, which expects the deal to add to its adjusted earnings in the first full year, were down 1.6 percent at $58.28 in afternoon trading.
In April, Express Scripts said it might lose its top client health insurer Anthem, which added about 19 percent of the company’s total consolidated revenue in the latest quarter.
Anthem had sued Express Scripts last year over claims of being overcharged.
Lazard and TripleTree LLC are Express Scripts’ financial advisers in the deal, while its legal adviser is Skadden, Arps, Slate, Meagher & Flom LLP.
J.P. Morgan Securities LLC and Morgan Stanley & Co LLC advised eviCore and Paul, Weiss, Rifkind, Wharton & Garrison LLP is its legal adviser.
Reporting by Manas Mishra and Divya Grover in Bengaluru; Editing by Savio D'Souza and Bernard Orr