Catalyst Health Solutions cooked up efficiencies in the prescription benefits market. The company provided pharmacy benefit management (PBM) services to clients including managed care organizations (MCOs), self-insured employers, third-party benefit administrators, and hospices. Its Catalyst Rx business helped clients design drug benefit plans that encouraged the use of preferred prescriptions bought from one of about 65,000 pharmacies (including contracted mail order pharmacies) in the company's nationwide network. It also provided customized reporting and data analysis services. In 2012 Catalyst Health Solutions was acquired by PBM software firm SXC Health Solutions in a deal worth some $4.4 billion.
Through the cash-and-stock merger transaction, the two companies combined their complementary resources -- SXC specialized in PBM tools and technologies while Catalyst focused on localized PBM client services -- to provide a broader array of products and services to a more diverse customer base. The merger allowed the combined entity to better compete in the consolidating PBM marketplace, especially as health reform measures take effect. Following the deal, the current SXC location in Lisle, Illinois became the combined company's headquarters, although the company continued to have a presence at the Catalyst operating base in Rockville, Maryland.
Catalyst has typically targeted the smaller self-insured employers or MCOs overlooked by the major PBM players (Caremark and Express Scripts). Together, MCO customers Independence Blue Cross and Wellmark Blue Cross Blue Shield of Iowa accounted for about 25% of the company's revenue. However, it increasingly competed for large accounts by aggressively marketing itself to these businesses and crafting tailored product packages designed to help lower employee prescription expenses. It also targeted economically challenged unions with shrinking budgets and third-party health plan administrators looking to provide complete benefit solutions.
In addition, Catalyst was growing in specialty customer categories. For instance, its Catalyst Rx Government Services unit worked to expand its customer base of state and local government agencies that provide worker benefits, and its HospiScript unit provided PBM services to the rapidly growing hospice market. Other specialty operations included a mail service fulfillment center in Ohio (Immediate Pharmaceutical Services), which allowed Catalyst to provide an in-house mail service option, and a division that aimed to control workers' compensation claims expenses (Catalyst Rx Comp).
Negotiating drug discounts with its network pharmacies and encouraging the use of cheaper generic drugs were both key to the company's success in controlling costs for new and existing clients. The company had embarked on a number of educational initiatives designed to teach its customers (as well as doctors) about generic drug options as well as non-prescription therapy and treatment options, where appropriate.
Catalyst also helped its customers keep prescription expenses under control by using data analysis and regionalized networks to identify trends in drug usage, which it could then review to decide if there were cheaper options available. It also designed wellness programs and chronic disease management programs to encourage healthier lifestyles and efficient pharmacy utilization. The company recently expanded its IT service platforms by adding electronic clinical messaging service (through the acquisition of NLBP in 2011) and a rebate administration tool (through the purchase of inPharmative in 2010).
While it historically relied on organic methods to add and retain clients, Catalyst had recently stepped up its acquisitive growth activities. The company grew its consumer base significantly when it acquired Walgreens Health Initiatives (WHI) for $525 million from Walgreen in mid-2011. The deal increased the firm's PBM membership base from 8 million to more than 18 million and broadened its annual prescription processing capacity from 80 million to 165 million; it also added strong disease management and government service programs. WHI's operations were gradually integrated into the Catalyst Rx division to maximize customer retention, and then rebranded as Catalyst Rx Health Initiatives. As part of the deal, Catalyst entered a 10-year contract to manage the PBM program for Walgreen's employees and retirees, as well as the Walgreen prescription savings program.
Additional acquisitions included the 2009 purchase of Total Script, a PBM based in Colorado that serviced small-to-midsized employers in the Midwest and managed pharmacy benefits for about 50,000 people. In 2010 the company further expanded its Catalyst Rx business by acquiring FutureScripts, a PBM serving some 1 million customers, from insurance company Independence Blue Cross (IBC) for $225 million in cash; it also continued to manage IBC's pharmacy benefit operations under a 10-year contract. These two acquisitions, as well as new client contracts and the inPharmative rebate service addition, contributed to a 30% jump in revenues in 2010.
The company changed its name from HealthExtras to Catalyst Health Solutions in 2008 to reflect its focus on providing PBM cost-control solutions to a diversified client base. Catalyst also divested its supplemental benefits (health and disability plans) unit that year; once the company's main business, the division's sales had gradually dwindled as Catalyst shifted its focus towards PBM services.