Centene Makes Investment In RxAdvance, Builds Partnership

Centene Corporation (NYSE:CNC) has made an initial investment in RxAdvance, which is a full-service pharmacy benefit manager (“PBM”). This deal not only establishes a customer relationship between the two companies but is also a strategic investment for Centene.

Inside the Deal

The transaction aims at using RxAdvance’s best-in-class technology platform that would help Centene improve health outcomes and control administrative as well as medical costs related to drugs. Per the terms of the transaction, Centene can expand its equity investment in RxAdvance in the future.

Through its Envolve division, Centene has been providing comprehensive and integrated specialty services for long, including pharmacy management services via its Envolve division. With the help of Envolve's clinical competencies and RxAdvance's Collaborative PBM Cloud platform, Centene will be able to deliver integrated, real-time and data-driven pharmacy management services.

Centene’s management believes that the transformative partnership will enable the company to build its next generation pharmacy management solution.

Why RxAdvance?

RxAdvance is famous for its Collaborative PBM Cloud platform. The cloud platform helps in the reduction of overall pharmacy costs and avoidable drug-impacted medical costs along with optimizing the specialty spend.

RxAdvance's transparent and unique approach, combined with its disruptive technology is expected to facilitate Centene in further improvement of health outcomes for its members and other customers and also in bringing down the overall healthcare costs.

Centene’s Inorganic Growth

Centene has been deploying capital in numerous acquisitions, mergers as well as alliances. Its inorganic growth strategy aims at expanding the company’s markets and increasing its Medicaid membership. In March 2016, the company acquired Health Net, that substantially added to its top line.

Price Performance

Centene’s inorganic growth efforts have significantly boosted its top line. These efforts have also been appreciated by shareholders. Its shares have rallied 51% in a year’s time, outperforming the industry’s gain of 32%. The recent investment is likely to drive the shares higher.

Pacts in the Industry

Mergers and acquisitions have been a key driver for the U.S. healthcare space, lately. In fact, health insurers are trying to consolidate with pharmacy benefits managers to streamline and cut costs in the drug supply chain.

The recent announcement of the acquisition of Express Scripts Holding Company (NASDAQ:ESRX) by Cigna Corporation (NYSE:CI) and Aetna Inc (NYSE:AET) by CVS Health (NYSE:CVS) Corporation point toward the growing trend of two industries of the healthcare sector coming together to provide comprehensive care in an amicable way.

Zacks Rank

Centene sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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