Merger, Acquisitions and Partnerships
Centene-WellCare- By far the biggest news of Q1, Centene acquired WellCare for $17B. The buy comes at a time when the deal was good for Centene – WellCare stock was 15% below its most recent 52-week high (which happened last October). Many analysts were surprised at the news of the buy, but shouldn’t be – WellCare has been on a strong growth path (both organic and through M&A) the past several years. At the time of the buy, WellCare operated in 13 state Medicaid programs (some overlapping existing Centene business, such as the recent NC wins. All told there are 9 states where both have Medicaid enrollment.). The purchase also gets Centene the recently shed Part D business from Aetna (which WellCare picked up late 2018, in a move Aetna made to help its deal with CVS go through with regulators). The new headcount for the combination will be 22M across Medicaid, Medicare and exchange coverage (12M in Medicaid). Some analysts see the deal as a defensive play by both organizations as they consider odds of competing in the next round of MCO consolidations. Total revenue for combined organization is $81B.
Anthem-Cigna – Although this deal died long ago, the fallout is still being managed. Latest news in the court fight is focused on the at-the-time CEOs of each organization blaming the other for sabotaging the deal. Cigna is seeking $15B because the deal failed and Anthem made guarantees it would not; Anthem is seeking $20B that Cigna based on claims of Cigna slowing the deal to make it not happen .
Centene- QCA Health, QualChoice (AR)- Centene announced a plan to purchase QCA Health Plan and QualChoice Life and Health Insurance early January. Catholic Health Inititiatives (CHI) previously owned the plans and sold them in 2014. Qual Choice operates individual and group plans. The deal could position Centene for a future MCO environment in Arkansas.
Plan / Provider
CVS-Aetna – Industry impact analyses are started to position the recent deal as a threat to hospitals (with a key reason Aetna paired up with CVS being the build out of retail pharmacies as a place of service for a broader service array of medical services). Hospitals are particularly concerned with the messaging from the new combo about being “the new front door to US healthcare.” The possibilities with the CVS footprint are significant – CVS has 10,000 stores and 1,100 clinics today. Up to 20% of store space may be used for delivering more healthcare services in the future. Aetna is piloting a hospital avoidance program with employees being directed to CVS MinuteClinics.
Walmart-Humana- Still being reported as “in the works” late January.
Fresenius-NxStage- Fresenius completed a $2B purchase of the make of home dialysis devices. The purchase will give lift to the company’s goal of increasing the percent of customers who are treated at home to 25% in 3 years (currently at 12%).
Catholic Health Initiatives and Dignity– The combo made a national 142-hospital system with $30B in annual revenues. The new organization is called CommonSpirit Health. CommonSpirit has facilities and care sites in 21 states and will be based on Chicago.
Baylor S+W – Memorial Hermann (Texas)- The deal announced in fall 2018 was called off in early February. The deal would have combined more than 70 hospitals annual revenues of $10.5B. No reasons for calling on the deal were given in the statements from either organization.
HCA-Mission (NC)- HCA acquired Mission Health (Asheville) for $1.5B in early Jan.
Retail health plays
Walgreens-Microsoft- Walgreens and Microsoft announced a 7-year deal focused on telehealth and mobile health mid-January. The deal responds to the previous year announcement of a CVS-Teladoc platform, and about the same time as RiteAid announced its plan to work with InTouch Health to enhance virtual care services in its kiosks. Walgreens also brings to the Microsoft deal a recent integration with MDLive, deals with Anthem and deals with American Well to provide phone-based non-emergent care. Microsoft is bringing cloud infrastructure and some AI development assets to the deal.
Rx & Life Sciences
J&J-Auris- Johnson and Johnson made the purchase of Auris Health for $3.4B in mid-February. Auris develops robotic medical technology used in various diagnostic and therapeutic applications. The move positions J&J for the next stages of their surgical robotics strategy.
Eli Lilly – Loxo Oncology- Eli mad the acquisition for $8B in cash.
Bristol-Myers Squibb- Celgene- Bristol Myers made the acquisition for $74B. Celgene develops oncology drugs.