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Our Take: Optum makes an unsolicited $3.3 billion bid for Amedisys, potentially starting a bidding war with Option Care Health

Jun 12, 2023

Amedisys received an unsolicited proposal from UnitedHealth Group’s Optum subsidiary on May 26 to acquire all outstanding shares of Amedisys’ common stock for $100 per share in cash, the home health provider confirmed last Monday.

Optum’s bid could jeopardize the definitive merger agreement Amedisys and Option Care Health announced on May 3. Under that agreement, Amedisys stockholders would receive 3.0213 shares of Option Care Health common stock per Amedisys share held at the closing of the transaction.

When the merger with Option Care Health was announced, the proposed deal was valued at approximately $3.6 billion. That figure was based on the closing price of Option Care Health’s stock on May 2 and was the equivalent of $97.38 per Amedisys share — representing a 26% premium to the May 2 closing price of Amedisys’ stock.

Optum’s cash bid, by comparison, is valued at approximately $3.26 billion, Reuters reported, noting that the offer was at a 26% premium to the closing price of Amedisys’ stock on June 2, before news of Optum’s bid was made public.

After consulting with outside counsel and the company’s financial adviser to evaluate Optum’s offer, Amedisys’ board found that Optum’s proposal “could reasonably be expected to result in an ‘Amedisys Superior Proposal’ as defined in the merger agreement with Option Care Health.”

Amedisys said it is engaging in exploratory discussions with Optum, after the two companies entered into a confidentiality agreement on May 30. Amedisys will have to pay Option Care Health $106 million if it terminates their agreement.

Our Take: Who will end up with Amedisys? Several analysts believe Optum stands a good chance of being the eventual victor, even though a merger with Optum is likely to undergo greater scrutiny by the Federal Trade Commission than a merger with Option Care Health would.

Baton Rouge, La.-based Amedisys is one of the nation’s largest providers of home health and hospice care. Option Care Health, based in Bannockburn, Ill., is the country’s largest independent provider of home and alternate site infusion services, so there’s minimal overlap between the two companies’ lines of business.

Optum, on the other hand, has a strong presence in the area of home health after closing its $5.4 billion acquisition of LHC Group — previously Amedisys’ main rival — in February. Optum appears confident, however, that it can overcome any potential regulatory hurdles to acquiring Amedisys.

An analyst with financial services firm William Blair & Co. said the combination of LHC Group and Amedisys would represent less than 10% of the home health market and even less of the hospice care market, Fierce Healthcare reported.

Meanwhile, in a statement Option Care Health issued in response to Amedisys’ disclosure of Optum’s unsolicited proposal, the company said its definitive merger agreement with Amedisys “delivers significant value to Amedisys and Option Care Health stockholders, a high degree of certainty in obtaining the required regulatory approvals due to the complementary nature of the parties’ businesses, and benefits patients, providers, payers, and care teams.”

There’s no indication yet that Option Care Health will increase its bid. Given UnitedHealth Group’s deep pockets, Option Care Health may decide to take the $106 million termination fee and look elsewhere.

Incidentally, Walgreens bought Option Care in 2007 for approximately $850 million and subsequently changed the name to Walgreens Infusion Services. After Walgreens merged with Alliance Boots in 2014, the home infusion division was spun off into an independent company once again named Option Care. Walgreens retained minority ownership in the company but sold 15.5 million shares in March at a price of $30.75 per share and its remaining stake of 10.8 million shares last week for $330 million.

What else you need to know
Medicare will cover certain new Alzheimer’s drugs that receive full FDA approval as long as beneficiaries meet eligibility requirements — including having a qualified physician who is participating in a national registry designed to collect real-world evidence about how the drugs work, CMS announced. The policy is less confining than the coverage proposal CMS issued for Biogen’s Aduhelm (adalimumab) last year, which only permits coverage when drugs approved under the FDA’s accelerated pathway are administered in eligible clinical trials. Nonetheless, the Alzheimer’s Association called the registry requirement “an unnecessary barrier.” On Friday, an FDA advisory committee voted 6-0 to recommend traditional approval of Eisai and Biogen’s Leqembi (lecanemab) based on the “robust” results of a confirmatory study; Leqembi gained accelerated approval in January. The FDA could make its decision on the drug’s full approval in the next several weeks. A briefing document the FDA released ahead of the meeting suggests the agency is leaning toward a favorable decision.

Merck is suing the federal government over Medicare price negotiations established in the Inflation Reduction Act (IRA). The drugmaker claims the IRA violates the U.S. Constitution by forcing manufacturers to negotiate prices below market value for drugs Medicare covers. The Takings Clause of the First Amendment requires the government to pay “just compensation” for private property taken for public use; the lawsuit claims the federal government will appropriate Merck’s property for public benefit under the IRA without paying fair value. Merck is also claiming the IRA violates the First Amendment’s free speech protections by forcing drug manufacturers to agree with HHS on a maximum fair price for their products. The lawsuit, filed Tuesday in D.C.’s district court, names as defendants the Department of Health and Human Services, HHS Secretary Xavier Becerra, CMS, and CMS Administrator Chiquita Brooks-LaSure. The legal move was not unexpected, as drugmakers began expressing opposition to price negotiations by Medicare long before the IRA was passed, saying the loss of profits would stymie research and innovation. CEOs at other drug companies have voiced support for Merck’s lawsuit, which suggests other legal action may follow. CMS is scheduled to publish its list of the first 10 drugs selected for price negotiations by Sept. 1, but that may now be postponed.

Mayo Clinic and Google are collaborating on the use of generative AI to improve clinicians’ data search capabilities and increase workflow efficiency, Google said in a press release. Initially, their effort will center on Google’s Enterprise Search on Generative AI App Builder (Gen App Builder), a tool that lets organizations create custom, HIPAA-compliant chatbots and semantic search apps “with little or no coding and no prior machine learning experience.” Gen App Builder can unify “multimodal” data (including images) “across dispersed documents, databases, and intranets,” according to Google, making it easier for clinicians and researchers to search for and analyze relevant information. Google provided additional details in a recent blog post. The company is partnering with “several” other health care organizations to develop these capabilities, though it did not specify which ones.

In separate news, Mayo Clinic revealed plans to redesign its campus in Rochester, Minn., in years to come, including the addition of “state-of-the-art, flexible physical spaces to allow full integration of digital technology.” The board of trustees approved several “enabling projects” ahead of a request for approval of the full strategic initiative later this year, according to Dr. Craig Daniels, who is leading the initiative. Although the health system did not provide an estimated cost, an article in the StarTribune referred to the “billion-dollar” expansion plans involving several blocks in the downtown area surrounding Mayo Clinic’s facilities.

The Center for Medicare and Medicaid Innovation will test the Making Care Primary (MCP) model in eight states, CMS announced Thursday, with a focus on assisting small, independent, rural, and safety-net organizations in the transition to value-based care. The model will incorporate a three-pronged strategy to improving patient care and making it more accessible: by expanding and enhancing care management and care coordination, providing tools to help primary care clinicians partner with health care specialists, and leveraging connections with community-based organizations to address patients’ health needs. MCP builds on earlier primary care models, such as the Comprehensive Primary Care model, and will run for 10.5 years, starting July 1, 2024. It will take a “progressive, three-track approach based on participants’ experience level with value-based care and alternative payment models,” CMS noted. Colorado, Massachusetts, Minnesota, New Jersey, New Mexico, New York, North Carolina, and Washington will participate in the pilot program. The application to participate will open late this summer. The National Association of ACOs criticized the new model for excluding primary care practices that participate in an ACO.

A federal judge granted Cigna a preliminary injunction prohibiting Amy Bricker, formerly the president of Cigna’s pharmacy benefit manager, Express Scripts, from providing any services to CVS Health, any CVS subsidiary, or any other entities “engaged in a business similar to, or that competes with, the business of Cigna.” (CVS Caremark is a direct competitor of Express Scripts.) Bricker resigned from Express Scripts in January to accept the roles of executive vice president of retail and chief product officer-consumer at CVS, starting Feb. 20. Cigna promptly sued to prevent her from making the move to CVS, claiming it would put Cigna’s trade secrets at risk, and the same judge granted a temporary injunction at that time. The preliminary injunction will remain in place while the noncompete case is being resolved. Insurer Centene switched its PBM contract from CVS Caremark to Express Scripts in late October; Bricker was instrumental in developing Express Scripts’ pitch for the new contract.

What we’re reading 
Current And Future Legal Attacks Against The Medicare Drug Price Negotiation Program. Health Affairs Forefront, 6.7.23

Regulators Face Novel Challenges as Artificial Intelligence Tools Enter Medical Practice. JAMA Health Forum, 6.8.23

Primary Care in Peril: How Clinicians View the Problems and Solutions. NEJM Catalyst, 5.17.23 (summary available, subscription required for the full article)


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