UnitedHealth Group pharmacy benefit manager OptumRx on Monday announced plans to acquire specialty drug provider Diplomat Pharmacy Inc. for about $300 million.
The news comes amid continued financial struggles for Diplomat. In the third quarter, the company reported a $177 million net loss.
In a statement, Diplomat chairman and CEO Brian Griffin said the decision to merge is “in the best interests of our shareholders, employees, and the clients and patients we serve.”
Founded in 1975, Diplomat provides specialty drugs – such as medications for cancers and immune disorders – in all 50 states and Washington, D.C. Once valued at more than $3 billion, the company now owes more than $560 million in debts. Last month, the company told investors it may have trouble making its debt payments.
“As we take into account lower than expected third quarter results, our reduced 2019 outlook and continued industry headwinds, it is possible we may be in violation of covenants for the period ending Dec. 31, absent the successful execution of mitigating strategies,” Griffin said in a Nov. 12 earnings call.
On Monday, shares of Diplomat fell to $3.91, down more than 30 percent from Friday.
Still, the deal may end up working in UnitedHealth Group’s favor.
“For UnitedHealth, the deal looks good,” wrote Brian Orelli, an analyst with The Motley Fool. “Diplomat adds specialty-pharmacy and drug-infusion capabilities. It's unclear what UnitedHealth might do with Diplomat's pharmacy benefit-manager business that it added recently. Perhaps it'll get sold to pay off some of the debt that UnitedHealth is assuming in the deal.”
In a statement, UnitedHealth said the combination would reduce prescription drug costs “while helping lower the overall total cost of care.”
Meanwhile, the pharmacy benefit management business has become a reliable source of revenue for UnitedHealth. In 2020, the company said Optum will likely generate more than 50 percent of its total earnings.