Pharmaceutical Company –
Catamaran
Team: Tracy, Paul, Mike, Anne, Taryn, Carol
Background History
• provides pharmacy benefit management (PBM) services and
healthcare information technology (HCIT) solutions to the
healthcare benefits management industry in North America
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electronic point-of-sale pharmacy claims management,
retail pharmacy network management,
mail and specialty pharmacy claims management,
Medicare Part D services,
benefit design consultation,
preferred drug management programs,
drug review and analysis,
consulting services,
data access, and reporting and information analysis
Background
• formerly known as SXC Health Solutions Corp
• changed its name to Catamaran Corporation in July 2012
• Catamaran Corporation was founded in 1993 and is
headquartered in Schaumburg, Illinois
• July 23, 2015, Catamaran Corporation operates as a
subsidiary of OptumRx, Inc.
• CEO: Mark A. Thierer
What's changing
• We will not migrate any additional commercial
pharmacy claims processing to RxClaim (Catamaran's
claims processing system).
• We will transition a limited number of clients
currently on RxClaim to our existing claims processing
platform.
• We are continuing to work with Catamaran to
transition home delivery pharmacy back-end
fulfillment services for base medications; Cigna retains
all aspects of our Specialty pharmacy business
What’s not changing?
• 1) Our commitment to own and operate our own integrated
PBM
• 2) Our ongoing relationship with Catamaran
• 3) Catamaran continues to manage the majority of Cigna’s
retail pharmacy network.
• 4) Our plan to transition back-end fulfillment services for
base medications in support of our home delivery pharmacy;
Cigna will continue to handle ALL aspects of our Specialty
pharmacy business
• 5) Our relationship with Catamaran on behalf of our
Government business, which was fully transitioned to their
RxClaim claims processing platform on 1/1/15
5 Leading PBMs - SWOT
Core Strategies
Value proposition:
– brings market leading economics coupled with the
most flexible operating platform in the business
– Helps clients capitalize on the growth of the ACA
due to dominant market share
– Helps clients manage trend and contain costs
CVS, Express Scripts, and Catamaran
Operating Margin
CVS is clearly the leader, with a margin twice as high as Catamaran's. That advantage
likely owes to leveraging CVS's retail footprint across Caremark's plan sponsors, giving
the company pricing power and opportunities to reduce overlapping costs.
Quarterly Comparison of CVS, Express
Scripts, and Catamaran Operating
Margin
Catamaran has been the biggest surprise, outpacing analyst estimates by an average
7.8% over the last four quarters as analysts have failed to adequately model cost
savings associated with its Catalyst acquisition.
EPS Trends for CVS, Express Scripts,
and Catamaran Operating Margin
Diluted Earnings per Share (EPS)
Debating Valuation of CVS, Express
Scripts, and Catamaran
While shareholders of Express Scripts and Catamaran are paying less than peak
valuation for each dollar of sales, investors are paying the most in five years for CVS's
sales, on hopes that the company's expansion of its MinuteClinic health clinics will
capture more post-reform patient prescriptions.
Impact on Cigna
• Role in Healthcare Environment
– Offers an alternative to other PBMs by
combining scale & purchasing power with
flexibility & agility
– connect pharmacists, doctors and caregivers
with prescription data to improve health
outcomes
– clinical intelligence, technology and scale to
lower payer costs and offer high level client
service
Impact on Cigna
Cigna expects to record one-time transaction costs, primarily for
advisory fees associated with this agreement in the second
quarter of 2013, resulting in an after-tax charge of approximately
$25 million that will be reported as a special item.
Cigna expects this transaction will have an immaterial impact to
adjusted income from operations1 in 2013. The Company
estimates that this agreement will begin making a positive
contribution to earnings in 2014 and will create annualized
earnings per share accretion of approximately $0.50 per share2
in 2015 through improved clinical management, purchasing and
administrative efficiencies.
Relationship with Cigna
• Cigna will retain formulary management, clinical and
product development, sales and marketing, and will
manage “all day-to-day customer- and client-facing
functions.”
• Catamaran will provide prescription drug procurement
and inventory management, order fulfillment for
Cigna's home-delivery pharmacy, retail network
contracting, and claims processing.
• Catamaran will remain behind the scenes, because the
mail pharmacy and all pharmacy-related customer
interactions will still have the Cigna brand.
• Cigna will lead the medical-pharmacy benefit
integration activities
Key Insights