The country's fourth largest drugstore chain is making a $2 billion bet on the business of pharmaceutical benefits management, amid rising drug prices and demand for retail consumer healthcare.
Rite Aid is acquiring the Ohio-based pharmaceutical benefits management company EnvisionRx from the global private equity firm TPG -- getting into the game with major rival CVS and new ones.
"The acquisition of EnvisionRx meaningfully expands our health and wellness offerings, enhancing our ability to provide a higher level of care to the patients and communities we serve," said Rite Aid chairman and CEO John Standley. "We will create a compelling pharmacy offering across retail, specialty and mail-order channels, enabling us to deliver cost-effective solutions to employers and health plans while driving growth and creating long-term value for our shareholders."
Camp Hill, Pennsylvania-based Rite Aid operates 4,569 pharmacies across 31 states (still selling tobacco products, unlike CVS stores) and will pay TPG $1.8 billion in cash and $200 million in stock for the acquisition.
Created in 2001, EnvisionRx is a national, full-service PBM and part of a family of companies in TPG's Envision Pharmaceutical Holdings. EnvisionRx describes itself as the the only PBM that "offers absolute transparency and guarantees 100 percent of all earned rebates, fees and discounts are passed back to the plan sponsor at the point of sale."
The company has annual revenues of $5 billion, with projected 2015 earnings of $150 million (before interest, taxes, depreciation, and amortization) in an increasingly competitive space marked by high drug prices and demand for speciality pharmaceuticals. Now, with EnvisionRx, Rite Aid will be vying against CVS not just in retail but in employer and institutional drug plans, as well as the likes of PBM giants Express Scripts and Catamaran.
"Combining our comprehensive suite of pharmacy benefit management services with Rite Aid's established retail healthcare platform is a natural fit that is increasingly preferred by plan sponsors," said EnvisionRx CEO Frank Sheehy, who spent 8 years with Aetna in the 1990s before entering the pharmacy benefits space.
"EnvisionRx's innovative business model has always set it apart from other PBMs, and as part of a recognized pharmacy leader, will now be well positioned for further success," boasted Sharad Mansukani, MD, chairman of EnvisionRx and senior advisor at TPG.
Once the deal closes this summer, the PBM will operate as a Rite Aid subsidiary, led by Sheehy and current management and with headquarters remaining in Twinsburg, near Cleveland.
Photo credit: Ildar Sagdejev.
