CVS continues its march to monopoly.

[F~A~R~V~A-Yankee Northern Allfather]

CVS to buy Medicare business of Universal American

The Associated Press
WOONSOCKET, R.I. - CVS Caremark Corp. said Friday it will pay $1.25
billion to buy Universal American Corp.'s Medicare prescription drug
services unit.
CVS said it pursued the deal because with the country's population
aging, a growing percentage of Americans will get their prescription
drug coverage from Medicare.
Shares of Universal American jumped by more than a third in morning
trading. The company said shareholders would get $12.80 to $13 per share
in cash and would own a new company operating Universal American's other
businesses.
CVS said the deal will more than double the size of its Medicare drug
business. Universal American serves about 1.9 million people in the
Medicare Part D federally subsidized prescription benefit program for
Medicare recipients, while CVS serves 1.2 million.
Woonsocket-based CVS, which operates a chain of drugstores and manages
pharmacy benefits, said the deal is expected to close in the second
quarter of 2011 and will add to its earnings per share within a year.
The agreement is contingent on approval by Universal American
shareholders.
Under the agreement, CVS will acquire all stock in Universal American
and give Universal American's shareholders 100 percent of a new public
company that will own Universal American's Medicare Advantage and
traditional insurance businesses. The new company will have about $640
million in cash and no debt, Universal American said.
CVS's third-quarter profit fell more than 20 percent, to $809 million,
as its Caremark unit continued to lose business. CVS pharmacy services
revenue fell 8.5 percent as private employers canceled contracts and
patients defected from its Medicare drug coverage plans. The company
said pharmacy shoppers were spending conservatively in the weak economy.
Analysts have questioned the wisdom of CVS's $26 billion 2007
acquisition of Caremark, which provides pharmacy-benefit services to
employers.
Shares of Universal American, a provider of health benefit plans based
in Rye Brook, N.Y., rose $5.63, or 38.5 percent, to $20.24, while CVS
shares fell 2 cents to $34.98 in morning trading.
Copyright 2010 The Associated Press. All rights reserved. This material
may not be published, broadcast, rewritten or redistributed.
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