Express Scripts to buy eviCore for $3.6bn

December 2017 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

December 2017 Issue

In a transaction that provides a comprehensive patient benefit management solution, Express Scripts Holding Company has reached an agreement to acquire privately-held eviCore healthcare for $3.6bn.

This combination of Express Scripts’ leading independent pharmacy benefit management (PBM) model and eviCore’s highly complementary medical benefits management (MBM) platform improves the ability to tackle the estimated $1 trillion wasted annually on unnecessary healthcare spending.

Furthermore, the acquisition will give Express Scripts an attractive entry point into the growing pharmacy market, an industry with has an approximate $400bn in annual spend. Likewise, MBM is a large and growing market, with more than $300bn spent annually. For Express Scripts, establishing a cornerstone platform in this market will enable it to build a uniquely comprehensive suite of solutions, with significant opportunities for cross-selling to both client bases.

“The rising cost of healthcare is one of the most important issues facing Americans today,” said Tim Wentworth, president and chief executive of Express Scripts. “Together with eviCore, Express Scripts will be an even more powerful partner in managing costs for patients and payers, bringing us closer to our goal of becoming the nation’s leading patient benefit manager. By further strengthening our independent model and creating numerous opportunities for growth, the acquisition of eviCore will deliver value for our clients, patients, providers and shareholders.”

As well as being a provider of integrated PBM services, including network-pharmacy claims processing, home delivery pharmacy care, specialty pharmacy care, specialty benefit management, benefit-design consultation, drug utilisation review, formulary management, and medical and drug data analysis services, Express Scripts also distributes a full range of biopharmaceutical products and provides extensive cost-management and patient-care services.

By acquiring eviCore from investors including General Atlantic, TA Associates and Ridgemont Equity Partners, Express Scripts will be further differentiated and positioned to take advantage of the transition to value-based care and the increasing demand from payers for a more comprehensive set of service offerings and solutions.

Excluding transaction-related expenses and amortisation of intangibles, Express Scripts expects the acquisition of eviCore – which has approximately 4000 employees and will operate as a standalone business unit within Express Scripts – to be accretive to adjusted diluted earnings per share in its first full year of operation.

Managing medical benefits for 100 million people, eviCore offers a broad range of integrated MBM solutions that drive significant and immediate cost reductions and improved quality care outcomes. Additionally, eviCore has leading positions managing benefits in categories including radiology, cardiology, musculoskeletal disorders, post-acute care and medical oncology – important therapeutic areas that are in need of greater cost management.

“The greatest opportunity to improve healthcare is by reducing wasteful spend and overutilisation while delivering quality outcomes,” said John Arlotta, chairman and chief executive of eviCore. “Together, eviCore and Express Scripts will be uniquely positioned to tackle these problems. We are proud of what we have accomplished over 25 years of serving patients and clients and we are excited about our future with Express Scripts.”

Acting as financial advisers to Express Scripts on the acquisition are Lazard and TripleTree, LLC. The legal adviser is Skadden, Arps, Slate, Meagher & Flom, LLP. For eviCore, the financial advisers are J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC. The legal adviser is Paul, Weiss, Rifkind, Wharton & Garrison, LLP.

Putting medicine within reach of tens of millions and making better health more affordable and accessible, the Express Scripts/eviCore transaction is subject to customary regulatory approvals and closing conditions, and is expected to close in the fourth quarter of 2017.

Fraser Tennant