Universal American to sell Medicare Prescription Drug business to CVS Caremark

CVS Caremark Corporation, the second-largest drugstore chain in the U.S., plans to acquire the Medicare Prescription Drug business of Universal American for about $1.25 billion.

CVS Caremark will acquire all of the outstanding stock of Universal American and distribute the shares of a newly formed public company to Universal American shareholders. The new company will own all other operations of Universal American, including its Medicare Advantage and Traditional Insurance businesses.

According to the Los Angeles Times, the size of CVS Caremark's business that provides prescription drug coverage under the Medicare Part D program will more than double because of the deal.

Medco Health Solutions, Inc.'s Medicare Part D prescription benefits management agreement with MemberHealth, LLC, a subsidiary of Universal American, has been terminated as a result of the CVS Caremark acquisition announcement. Medco provides pharmacy benefit management services to beneficiaries of various Medicare plans that are under contract with the Centers for Medicare and Medicaid Services.  

"Universal American will now focus its energies on overcoming our regulatory challenges and building momentum in the Medicare Advantage business to take advantage of our Healthy Collaboration approach to healthcare," said Richard Barasch, chairman and CEO of Universal American, in a press statement.

The transaction is expected to close by the end of the second quarter of 2011 and is subject to customary closing conditions.