Centene buys Magellan in mental health push
Insurer Centene Corp agreed on Monday to buy Magellan Health Inc, in a transaction valuing the target company at $2.2 billion, to expand further into mental-health care.
Centene will pay $95 a share in cash, according to a statement, or 15% above Magellan Health’s closing price on Thursday. The purchase will be primarily funded with debt, and JPMorgan Chase & Co has provided a bridge financing commitment.
Centene is a top seller of governmentsponsored health plans such as Medicaid and Medicare, and the combination will help it better integrate behavioural health into offerings.
Magellan manages specialty care, including treatments for mental health and substance use disorders, for insurers and other customers.
“There is a critical need for a fundamentally better approach to supporting people with complex, chronic conditions through better integration of physical and mental health care” Michael Neidorff, Centene’s chief executive officer, said in the statement. “This has become even more evident in light of the pandemic.”
“Patients’ medical costs can double or triple when combined with behavioural health conditions,’’ Neidorff said on a call with analysts.
Health plans and employers in the past turned to entities like Magellan to manage behavioural health separately from medical care, carving out a portion of insurance premiums for that purpose.
More recently, the industry has promoted integrating medical, behavioural, and pharmacy care, with one entity managing all three benefits.
Insurers have moved to consolidate medical plans with pharmacy benefit managers and other specialty health benefits businesses. Anthem Inc last year purchased a competitor to Magellan, Beacon Health Options.
Neidorff said in an interview that he envisioned pairing behavioural and medical interventions together more seamlessly.
For example, when a patient is newly diagnosed with diabetes or cancer, they might get referred to a psychologist as well, he said.
“I want that family to have access to the psychological help they need to deal with it,” Neidorff said. “In the longer term, it reduces costs.”
Magellan CEO Ken Fasola will stay on, and the unit will continue to operate independently within Centene after the transaction, according to the companies.
Centene has increased revenue from $23 billion in 2015 to about $111 billion expected in 2020 through a series of large health plan acquisitions.
Last week the company closed the acquisition of Pantherx, a specialty pharmacy focused on rare diseases.
The Magellan deal is expected to close in the second half of 2021.
Announced on the first business day of the year, the deal picks up where 2020 left off in terms of mergers.
Health-care companies announced $362.7 billion of deals last year, data compiled by Bloomberg show.
In December, AstraZeneca Plc agreed to acquire rare-disease specialist Alexion Pharmaceuticals Inc for $39 billion deal in the industry’s biggest transaction of 2020.