WellPoint could sell drug benefits unitAnalysts say operation that employs 400 at airport site could bring $5 billion offerBy Jeff Swiatekjeff.swiatek@indystar.com
WellPoint is said to be shopping its pharmaceutical benefits management business, creating uncertainty for the 400 workers it employs in a converted portion of the former United Airlines repair hub in Indianapolis.
Wall Street analysts think it could be an attractive move because the sale could generate up to $5 billion for WellPoint.
Executives at the health benefits giant, headquartered on Monument Circle, have given vague replies to questions from analysts and the media about the sale rumors.
WellPoint executives' public comments on the issue have seemed to indicate a sale isn't in the offing. At meetings as recently as the Jan. 28 fourth-quarter earnings teleconference, WellPoint executives said they want to provide integrated and coordinated care to their members.
That suggests they want to keep pharmacy management functions in-house because they're a key part of controlling health-care costs. Pharmacy management involves handling complicated prescriptions that are costly to health insurers to provide.
But John Rex, a stock analyst for J.P. Morgan who follows WellPoint, said in an investor report this week that "we have noted a softening of that tone by current leadership."
If WellPoint executives change their strategy, it "would mark a significant turn from the former senior management's long-held belief" that it could serve its members better by keeping the business, Rex wrote.
Asked about sale rumors, WellPoint spokeswoman Cheryl Leamon said Thursday, "We don't comment on rumors or speculation."
A sale could be an economic blow to Indianapolis if the buyer decided to close the WellPoint facility at Indianapolis International Airport.
The facility opened in October 2007 and employs 400 people, many of them highly paid pharmacists and technicians. Employment is expected to more than double as usage of high-cost drugs grows.
WellPoint has two other large facilities, in Ohio and Texas, that are used in its pharmacy benefits management business, which employs 2,100 people overall.
One major pharmacy benefits player, Medco, is opening a large mail-order pharmacy of its own in Boone County later this year. The $150 million distribution center will eventually employ 1,300 people.
A spokeswoman for Medco said it won't comment on speculation that it might be interested in buying the WellPoint business.
Rex, the analyst, said one reason a health-care company might sell its pharmacy benefits business is to redeem its true value. Publicly traded companies that primarily do pharmacy benefits management are valued higher in the market than health companies that own a captive pharmacy benefits business, he said.
WellPoint is said to be shopping its pharmaceutical benefits management business, creating uncertainty for the 400 workers it employs in a converted portion of the former United Airlines repair hub in Indianapolis.
Wall Street analysts think it could be an attractive move because the sale could generate up to $5 billion for WellPoint.
Executives at the health benefits giant, headquartered on Monument Circle, have given vague replies to questions from analysts and the media about the sale rumors.
WellPoint executives' public comments on the issue have seemed to indicate a sale isn't in the offing. At meetings as recently as the Jan. 28 fourth-quarter earnings teleconference, WellPoint executives said they want to provide integrated and coordinated care to their members.
That suggests they want to keep pharmacy management functions in-house because they're a key part of controlling health-care costs. Pharmacy management involves handling complicated prescriptions that are costly to health insurers to provide.
But John Rex, a stock analyst for J.P. Morgan who follows WellPoint, said in an investor report this week that "we have noted a softening of that tone by current leadership."
If WellPoint executives change their strategy, it "would mark a significant turn from the former senior management's long-held belief" that it could serve its members better by keeping the business, Rex wrote.
Asked about sale rumors, WellPoint spokeswoman Cheryl Leamon said Thursday, "We don't comment on rumors or speculation."
A sale could be an economic blow to Indianapolis if the buyer decided to close the WellPoint facility at Indianapolis International Airport.
The facility opened in October 2007 and employs 400 people, many of them highly paid pharmacists and technicians. Employment is expected to more than double as usage of high-cost drugs grows.
WellPoint has two other large facilities, in Ohio and Texas, that are used in its pharmacy benefits management business, which employs 2,100 people overall.
One major pharmacy benefits player, Medco, is opening a large mail-order pharmacy of its own in Boone County later this year. The $150 million distribution center will eventually employ 1,300 people.
A spokeswoman for Medco said it won't comment on speculation that it might be interested in buying the WellPoint business.
Rex, the analyst, said one reason a health-care company might sell its pharmacy benefits business is to redeem its true value. Publicly traded companies that primarily do pharmacy benefits management are valued higher in the market than health companies that own a captive pharmacy benefits business, he said.
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