Change Healthcare has begun May by closing two deals worth $268 million, with the company buying back one of its former units and selling another. In the deals, Change Healthcare bought back eRx Network for $212.9 million and sold its Connected Analytics division to Kaufman Hall & Associates for $55 million.
In a statement, Change Healthcare said the purchase of eRx Network supports the former’s commitment to focus on and invest in core aspects of the business to fuel long-term growth and advance innovation.
Bringing back eRx into the fold
“Bringing eRx back into the fold will enable us to leverage our combined scale, breadth of solutions, and network capabilities to increase market penetration, advance innovation, and create new opportunities. As a leader in delivering advanced technology solutions for pharmacies, providers, and pharmaceutical companies, eRx aligns with our strategy to reduce costs, improve outcomes, and enhance consumer engagement for our customers,” said Neil de Crescenzo, president and Chief Executive Officer, Change Healthcare.
Change Healthcare said the acquisition of the eRx network was approved by a special committee of its board of directors. The special committee received a fairness opinion from Barclays that the purchase price was fair to Change Healthcare. Between March 1, 2019 and February 29, 2020, eRx generated approximately $67 million in annual revenue.
The combined synergies, Change Healthcare said, will offer a broader solutions portfolio to pharmacies and life sciences companies and facilitate innovations on health plan solutions driven by a comprehensive view of members’ claims, bills, payments, and now, pharmacy interactions. “From an innovation standpoint, Change Healthcare will now be able to leverage the valuable combination of medical and pharmacy data, and provide eRx customers the benefits of the intelligent medical network with scalable cloud-based technologies,” a statement said.
What eRx offers
eRx Network connects about 59,000 pharmacies and processes more than 1.5 billion claims transactions a year. It handles 520 million e-prescribing transactions a month. The business also markets insurance verification, e-prescribing, and claims billing services.
In explaining what its latest acquisition does, Change Healthcare said eRx’ s real-time pharmacy network is integrated into pharmacies’ workflows. The company also helps pharmacies improve operational efficiency and optimize reimbursement, enabling providers to cost-effectively exchange electronic prescriptions with pharmacies. eRx also facilitates partner programs that help pharmacies improve profitability and helps payers, pharmaceutical companies, and other industry stakeholders administer patient-centric programs.
A filing with the Securities and Exchange Commission showed that in 2017, McKesson Corporation and Change Healthcare Holdings created Change Healthcare as a joint venture that combined the majority of McKesson’s technology solutions segment and substantially all of Change Healthcare Holdings’ legacy business.
The joint venture then spun out eRx Network.
On March 10th of this year, the two companies announced the completion of their split.
Among the terms of the split between McKesson and Change Healthcare Holdings, was an option that allowed Change Healthcare to buy back eRx Network if McKesson’s stake in the combined company fell below 5 percent of the joint venture.
Sale of Connected Analytics
In the other deal, Change Healthcare sold its Connected Analytics division to Chicago-based Kaufman Hall & Associates for $55 million. The set of products counted more than 300 health care organizations as customers and was one of the groups within McKesson Technology Solutions, it was reported.
The FierceHealthcare website reported that Kaufman Hall runs a portfolio of software, data, and consulting businesses and works with more than 3,000 health care, higher education, and financial customers. Kaufman Hall will combine the Connected Analytics portfolio, which includes Analytics Explorer, Performance Manager, and data solutions, with Axiom Software, the financial and clinical analytics platform of Kaufman Hall Software.
“The sale of the Connected Analytics business aligns with our previously stated strategic intent to concentrate on the areas of our business where we can drive the greatest impact for our customers, through our Change Healthcare platform. This action strengthens our ability to direct our focus and resources towards that objective while placing the Connected Analytics business with an organization that can support its core mission and strategies,” said de Crescenzo.
Between March and December of 2019, the Connected Analytics division generated revenue of $48.6 million.
Last year, Change Healthcare announced a price for its initial public offer, which was below analysts’ expectations.
Change Healthcare filed a prospectus with the SEC for a $100 million IPO hoping to cover over $5 billion worth of debts.