WellCare is spending $2.5 billion to become the biggest Medicaid coverage provider in Michigan and Illinois and add an in-house pharmacy benefit manager, following the lead of competitors like UnitedHealth and Cigna.
Pharmacy benefit managers, or PBMs, run prescription drug coverage. Insurers have been pushing to build or buy these businesses in large part to improve how they share patient data and manage care. They’re also trying to gain better control of prescription drug costs.
Cigna Corp. said in March that it would spend $52 billion on Express Scripts Holding Co., one of the nation’s biggest PBMs. The Blue Cross-Blue Shield insurer Anthem is building a PBM with help from CVS Health Corp., which is buying the insurer Aetna.
Meanwhile, the nation’s largest insurer, UnitedHealth Group Inc., has created one of the biggest PBMs through its Optum business.
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WellCare Health Plans Inc. said late Tuesday that it will buy the privately held insurer Meridian in a cash deal it expects to close this year. Meridian has about 1.1 million customers and a pharmacy benefit manager that mainly serves that customer base.
The deal gives WellCare geographic diversity and revenue and earnings growth opportunities, Leerink analyst Ana Gupte said in a research note. She called the addition of the PBM “icing on the cake.”
Medicaid is the state- and federally run program for people who are poor or have disabilities. Tampa, Florida-based WellCare covers more than 3 million people, mostly by running Medicaid coverage in Florida, Georgia, Kentucky and Missouri.