Featured in Health Business Daily, Nov. 28, 2017

Express Scripts Sees Integration Potential In Deal to Buy Benefits Manager eviCore

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By Judy Packer Tursman, Senior Reporter
October 13, 2017Volume 18Issue 19

In a move that pulls pharmacy benefits management together with broader medical benefits management, Express Scripts Holding Co. has reached an agreement to acquire privately held eviCore healthcare for $3.6 billion, the PBM giant said Oct. 10. Express Scripts manages pharmacy benefits for 80 million people, while South Carolina-based eviCore manages medical benefits for 100 million people. The mega-deal is expected to close in the fourth quarter of 2017.

“At the conclusion of this deal, one out of every three Americans will have a benefit managed by us,” giving St. Louis-based Express Scripts “great ability to bring down the cost curve,” company spokesperson Brian Henry told AIS Health in an Oct. 10 phone interview.

Yet scale is less important than finding ways for Express Scripts to integrate eviCore’s capabilities in managing specialty medical services, according to Ashraf Shehata, a principal in KPMG’s health care life sciences advisory practice and in its Global Healthcare Center of Excellence.

“If they didn’t do anything, just acquire [eviCore]…that would give them a par capability” with insurer-based PBMs, Shehata told AIS Health in an Oct. 11 phone interview. “Step No. 1, once the acquisition is approved, is to integrate it successfully. Step No. 2 is to maintain their book of business, their clients. And step No. 3 is innovation…working with key clients [on] new products and capabilities.”

Drug Benefit News

Express Scripts Teams With eviCore

“I think there are a lot of great opportunities here,” Shehata added.

Henry attributed the timing of Express Scripts’ eviCore acquisition to the right opportunity coming along, not due to its impending loss of a contract with its biggest client, Anthem, Inc. (DBN 5/5/17, p. 1). Express Scripts seeks “complementary and supplemental pieces” to add to its core business; if the PBM finds them, then “we’re absolutely going to look at those opportunities,” he said. “Because of our size, we are looking at all kinds of opportunities all the time.”

Moreover, Henry described Express Scripts’ move as forward-thinking, not reactionary. “We have looked at this area [i.e., medical benefit management] in the past….It’s not a reaction to anything, more a look ahead to what our clients want…and where we see the market going,” he said. “eviCore became available and we moved.”

“We see this as an opportunity to move into patient benefit management. We were doing a little bit in this area, but this takes us up to a significant level,” Henry added. “We want to continue to grow the model of best-in-class [pharmacy and medical] benefits management…and see what we can do together.”

Shehata said Express Scripts “has always been quite acquisitive.” He said the bigger issue is that of PBMs running out of places to grow their core model — and Express Scripts is a pure-play PBM up against retail- and insurer-based PBM models, all looking to improve their value-added capabilities.

“eviCore really focuses on specialty therapy areas, which will help Express Scripts understand utilization trends…and eviCore has built partnerships with academic medical centers [that] Express Scripts can leverage,” he said. “It’s a very nice model…because of the push to better manage specialty [medical care] costs” — a competency needed to compete against plan-owned PBMs.

Dan Mendelson, president of Avalere Health, told AIS Health the eviCore acquisition “diversifies [Express Scripts] into broader care management. The radiology management assets are an established brand and have long been a valuable tool for plans seeking to keep radiology costs under control.”

“To stay relevant to plans that are increasingly engaging their own data, PBMs will need to engage more diverse data sources that enable management of drug costs in the context of medical management,” he said.

Express Scripts officials broadly characterized the PBM’s transaction — which will be its largest acquisition since it bought Medco Health Solutions for $29 billion in 2012 — as a way to bring on board a complementary business to trim waste and maximize the value of the health care spend for patients and payers.

“America wastes nearly $1 trillion annually on healthcare due to nonadherence to medicine and unnecessary procedures. Together, Express Scripts and eviCore…will help solve the problem,” Jennifer Luddy, an Express Scripts spokesperson, said in a statement.

As for the timeline, the deal will allow Express Scripts to advance rapidly — giving it “an attractive entry point” — into medical benefits management services, company officials said. Asked about antitrust issues, Henry said: “We’ll go through whatever customary reviews are necessary, and we remain confident in our ability to close this before the end of the year.”

Express Scripts noted that pharmacy is an industry with roughly $400 billion in annual spend, while the health care industry spend is close to $3.4 trillion. And medical benefit management is “a large and growing market” — with $300 billion-plus spent annually in the areas that eviCore currently manages, including radiology, cardiology and medical oncology.

Setting up a “cornerstone platform” in this market will let Express Scripts build a suite of products with “significant opportunities for cross-selling to both client bases,” the company said.

According to Express Scripts, eviCore will operate as a stand-alone business unit within the PBM. Henry said eviCore “has a strong client base and has done really well with those clients. [We] just want to give it backing.”

John Arlotta, chairman and CEO of eviCore, said the deal uniquely positions the two companies to tackle waste and overutilization “while delivering quality outcomes.” eviCore’s clients include managed care organizations, self-insured employers and risk-bearing provider organizations serving commercial, Medicare, and Medicaid populations. Express Scripts said it will provide details on the eviCore acquisition during its third-quarter earnings call scheduled for Oct. 25.

See Express Scripts’ release at http://tinyurl.com/ybmddhmd.

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