PBM Caremark Rx To Acquire AdvancePCS

Officials from pharmacy benefit manager Caremark Rx on Sept. 2 announced that the company will purchase PBM AdvancePCS for $5.6 billion in stock and cash in a deal that joins two of the nation's largest PBMs, the New York Times reports (Freudenheim, New York Times, 9/3). Under the deal, AdvancePCS shareholders will receive the equivalent of 2.15 shares of Caremark stock for each AdvancePCS share -- 10% in cash and 90% in stock (AP/Las Vegas Sun, 9/2). Caremark will also assume about $400 million of AdvancePCS' debt (New York Times, 9/3). The new company is expected to produce $23 billion in revenue per year and handle about 600 million prescription claims (AP/Las Vegas Sun, 9/2). Caremark covers about 10 million people, and AdvancePCS covers about 35 million people. The deal must be approved by regulators and shareholders of each company (New York Times, 9/3). Officials from the two companies are expected to promote the deal by saying the new company's increased size will allow it to cut costs and garner larger discounts from drug makers, which could lower drug prices for consumers, the Wall Street Journal reports (Sidel, Wall Street Journal, 9/3). The PBMs expect to reduce costs by $125 million in the first year of the merger, the AP/Sun reports (AP/Las Vegas Sun, 9/2). However, the deal is likely to draw "intense scrutiny" from antitrust regulators and rival PBMs because it could "further concentrate power" in the PBM market, which has been under watch recently because of PBMs' business practices and effect on drug prices, the Journal reports (Wall Street Journal, 9/3). If approved, Caremark shareholders would hold about 58% of the new company (AP/Las Vegas Sun, 9/2).