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Maryland pharmacy benefit manager announces merger

As the economy works overtime to get back on track, several Maryland companies have been joining forces in their business ventures to create new growth and opportunities for the area.

Rockville, Maryland based pharmacy benefit manager Catalyst Health Solutions has announced its intentions to merge with SXC Health Solutions. If approved, the deal would be worth about $4.4 billion. Experts say the merger would likely increase competition in the industry and could create lower prescription prices for "major employers." They added that the deal might also be indicative of an increased wave of PBM acquisitions aimed at addressing issues related to the pricing of prescription pharmaceuticals.

The boards of directors for both Catalyst and SXC unanimously voted in favor of the deal. The resulting company would be worth an estimated $13 billion and would maintain offices in Maryland, though the headquarters would be located out-of-state.

The companies issued a joint statement in which they detailed the merger's sales terms, revealing that Catalyst shareholders would receive 0.66 share and $28 for each Catalyst share. The companies expect to finalize the merge in the second half of 2012, which would require the companies to obtain approval from shareholders and certain regulatory bodies before that time.

Although the combined company will still be several times smaller than some of its competitors, employers are hopeful that the firm's increased size will allow it to secure better prices on medication for its clients. On health practice industry expert explained, "You get to a point where you're big enough where the big manufacturers have to take you seriously, and that should help them negotiate rebate savings."

SXC expects the merger to result in increased earnings next year, as well as "$125 million of annual costs savings over the first 18 months to two years after closing the deal." If the deal is successful, Catalyst's current shareholders would control about 35 percent of the combined company while PXC's shareholders would own the remaining 65 percent.

Source: Wall Street Journal, "Drug Plan Manager SXC to Buy Catalyst," Jon Kamp, April 18, 2012

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