WellCare’s Meridian purchase boosts Medicaid market share

Les Masterson

Sept. 5, 2018

Dive Brief:

• WellCare has completed its $2.5 billion purchase of Meridian Health Plan of Michigan, Meridian Health Plan of Illinois and MeridianRx, a pharmacy benefit manager.
• Meridian serves 1.1 million members in Medicaid, Medicare Advantage and Affordable Care Act exchange plans in Michigan, Illinois, Indiana and Ohio, as well as dual eligibles. Before the purchase, Tampa, Florida-based WellCare covered about 4.4 million members.
• When WellCare announced the deal in May, it said the transaction would put it in the leading Medicaid market position for six states and would make it the largest Medicaid payer by membership in Michigan and Illinois, where Meridian had 508,000 and 565,000 members, respectively, as of May 1.

Dive Insight:

WellCare CEO Ken Burdick said in a statement the transaction "grows and diversifies our Medicaid membership by nearly 40 percent, increases our Medicare Advantage presence in new markets, adds a proprietary PBM platform and enhances WellCare's integrated dual-eligible and Marketplace capabilities, positioning us for further growth within government-sponsored programs."

During the company's Q2 call, WellCare officials said its Medicare premium revenue grew more than 17% in the second quarter compared to a year ago. They pointed to the purchase of Universal American and organic growth for the reasons behind the increase. The Meridian purchase should increase that premium growth further. 

The deal also gives WellCare a PBM, which payers have increasingly grown interested in creating or buying. Chris Curran, vice president of corporate communications and brand marketing for WellCare Health Plans, told Healthcare Dive that MeridianRx will offer "greater transparency" and help provide high-quality, affordable care with lower costs.

"The platform will provide additional insights into managing pharmacy costs and improving quality through the integration of pharmacy and medical care," Curran said.

The move is just the latest payer/PBM integration. Aetna/CVS and Cigna/Express Scripts deals are also in the pipeline and Anthem is launching its own PBM. Collectively, PBMs have been on the hot seat as the Trump administration points the finger at them for increasing drug costs and considers legislation to change the rebates plans receive from pharma companies.

The Meridian deal will additionally affect CVS. WellCare is one of CVS' largest clients and has about 4.5% of CVS' PBM lives, so the MeridianRx deal will dent CVS business. However, Leerink Partners said in a recent note they don't expect the loss will be a significant threat to the pharmacy chain.

The Meridian purchase comes after WellCare reported $4.61 billion in revenues in Q2, which was a 7.4% increase year over year. The company also reported a $151.6 million profit and a 3.3% net profit margin.

https://www.healthcaredive.com/news/wellcares-meridian-purchase-boosts-medicaid-market-share/531568/