Rite Aid buying a pharmacy benefit manager

Drugstore chain Rite Aid will use a $2 billion purchase of EnvisionRx to reach into managing pharmacy benefits, in a deal that also builds its stake in two hot growth areas, specialty pharmaceuticals and Medicare prescription drug coverage.

Shares of the nation's third-largest drugstore chain surged Wednesday after it announced that it will pay $1.8 billion in cash and $200 million in stock for EnvisionRx, a pharmacy benefit manager (PBM) owned by the investment firm TPG. Rite Aid stock closed up 6.6 percent, or 50 cents, to $8.08.

PBMs run prescription drug plans for customers like employers and insurers. They process mail-order prescriptions and handle bills for prescriptions filled at pharmacies. EnvisionRx also offers services in a growing area for prescription drug spending, specialty pharmacy, and a national Medicare prescription drug plan.

Camp Hill, Pa.-based Rite Aid will enter a market brimming with competition from other national players like Express Scripts Holding Co., which serves about 85 million people, and rival drugstore operator CVS Health Corp.

But chairman and CEO John Standley told analysts Wednesday morning that the deal was a "logical step" for a company that has gained strength over the last few years.

The company runs 4,569 drugstores, a total that trails Walgreen Co. and CVS. It has worked aggressively to clean up its performance by paring debt, closing underperforming stores, and installing in others a wellness theme that features more organic food and personal care products, among other items.

Wednesday's announcement came nearly two months after Rite Aid said its fiscal third-quarter earnings jumped 47 percent in a performance that trumped Wall Street expectations.

Standley said that by pairing an established retail pharmacy network with a PBM, Rite Aid can provide more benefits that help customers manage their health better.

"The dynamics in the marketplace today are reshaping how we must serve our customers," he said, adding that those customers now control health care decisions and are increasing their focus on cost.

The deal also gives Rite Aid stronger footing in the market for specialty drugs, complex and expensive medicines that are becoming a growing source of revenue for drugstore chains.

EnvisionRx, which is based in Twinsburg, Ohio, provides benefits for about 21 million people and serves a range of employers, including the supermarket chain Safeway. It is projected to bring in about $5 billion in revenue this year.

The boards of directors for both companies have approved the acquisition, which is expected to close in September.