Catalyst Health Solutions: A Script for Success?

16 Pages Posted: 30 May 2017

See all articles by Robert S. Harris

Robert S. Harris

University of Virginia - Darden School of Business

Rick Green

University of Virginia - Darden School of Business

Abstract

In February 2011, David Blair, CEO of Catalyst Health Solutions, was considering another acquisition. Catalyst was already the fastest-growing pharmacy benefit management company in the United States, and Blair had his eye on a subsidiary of Walgreen Co., the second-largest retail drugstore chain in the country. Walgreen Co. was focusing its corporate strategy on the retail business and had just purchased 258 Duane Reade pharmacies in New York for over $1 billion. Walgreen Co.'s subsidiary, WHI, managed pharmacy benefits and was a relatively small part of the overall company, contributing less than 2% of its bottom line. Might Walgreen Co. be interested in selling WHI?

Excerpt

UVA-F-1666

Rev. Jun. 21, 2012

CATALYST HEALTH SOLUTIONS: A SCRIPT FOR SUCCESS?

In February 2011, David Blair, CEO of Catalyst Health Solutions (Catalyst), was considering another acquisition. Catalyst was already the fastest-growing pharmacy benefit management (PBM) company in the United States, and Blair had his eye on a subsidiary of Walgreen Co., the second-largest retail drugstore chain in the country. Walgreen Co. was focusing its corporate strategy on the retail business and had just purchased 258 Duane Reade pharmacies in New York for over $ 1 billion. Walgreen Co.'s subsidiary, Walgreens Health Initiatives (WHI), managed pharmacy benefits and was a relatively small part of the overall company, contributing less than 2% of its bottom line. Might Walgreen Co. be interested in selling WHI?

Pharmacy Benefit Management Companies

PBMs acted as intermediaries between pharmaceutical companies and consumers by managing the distribution of prescriptions (“scripts”). Most buyers of prescription drugs were enrolled in plans offered by their employers. Large corporations offered prescription drug plans administered by managed care organizations (MCOs), while municipal governments normally self-insured their employees. Enrollees in the plans typically purchased medications through pharmacies or by mail-order. In both instances, the PBM was responsible for ensuring that the individual received the prescription in accordance with the terms of his or her benefit plan. Because PBMs could use their purchasing power to negotiate discounts with pharmacies, it was estimated that PBMs actually reduced prescription drug costs for payers by up to 25%.

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Keywords: competitive competition consolidation consolidate

Suggested Citation

Harris, Robert S. and Green, Rick, Catalyst Health Solutions: A Script for Success?. Darden Case No. UVA-F-1666, Available at SSRN: https://ssrn.com/abstract=2974487

Robert S. Harris (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4823 (Phone)
434-924-4859 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm

Rick Green

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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