Under terms of the acquisition, Caremark Rx will acquire 100% of AdvancePCS’ outstanding stock, with AdvancePCS shareholders receiving roughly 2.15 shares of Caremark Rx stock for each AdvancePCS share. The deal, valued at approximately $5.6 billion in stock, cash and debt, values AdvancePCS shares at $54.61 – a 37% premium to its Tuesday closing price of $40, according to a news release.
Following the transaction, which is subject to shareholder and regulatory approval, Caremark Rx shareholders will own about 58% of the combined company and AdvancePCS shareholders about 42%. The merged company will have a market value of about $13 billion and combined annual revenues of about $23 billion.
The new revenue estimates would almost quadruple Caremark’s 2002 revenue of $6.81 billion and could make it the second largest in terms of revenue behind Medco Health Solutions, which had about $33 billion in sales in 2002 and was spun off from drugmaker Merck & Co. as an independent company in August.
Industry Under Fire
The acquisition comes at a time when the PBM industry as a whole has come under fire for taking rebates from drug makers, causing concerns the payments could corrupt their efforts to obtain the most effective drugs and best possible discounts for clients (See Pharmacy Benefit Managers Lose Luster As Rx Cost Cutters ). Last month, a federal judge gave preliminary approval to a settlement in a class-action suit involving Medco (See Preliminary Approval Given In Medco Suit ).
Additionally, in March, the American Federation of State, County & Municipal Employees (AFSCME) filed suit against AdvancePCS, Medco, Express Scripts and Caremark Rx alleging the four PBMs inflated the price of prescription drugs (See Union Charges PBMs With Price Inflation ).