CVS Caremark announced it has entered into an agreement to acquire the Medicare Part D business of Universal American for approximately $1.25 billion. Universal American is a leading Medicare Prescription Drug Plan (PDP) sponsor based in Rye Brook, New York. The acquisition will be more than double the size of CVS Caremark's Medicare Part D programme. Universal American's Part D business currently serves approximately 1.9 million Medicare PDP members, while CVS Caremark serves approximately 1.2 million Medicare PDP members. This reflects current levels of membership and does not include 2011 auto assignment or the results of the Annual Enrolment Period which ended on December 31, 2010.

“Today's transaction furthers CVS Caremark's position as a significant player in one of the nation's fastest growing segments of the Pharmacy Benefit Management industry. A growing portion of the country's population will receive their prescription drug coverage under Medicare plans, driven both by age demographics and the anticipated shift of retirees from employer based coverage to Medicare that will likely result from health care reform,” said Per Lofberg, president of Caremark Pharmacy Services. “The Medicare Part D programme is integral to CVS Caremark's long-term growth strategy. We believe that bringing together these two businesses will strengthen our competitive offerings, enabling us to provide Medicare beneficiaries with expanded products and services and lower the cost of pharmacy care.”

CVS Caremark said the transaction will be accretive to earnings per share in its first full year. The company continues to be highly focused on improving shareholder returns and this acquisition is consistent with the company goal of investing in core businesses that help drive growth and improve returns on invested capital. This transaction is not expected to impact the company's previously announced dividend growth and share buyback initiatives.

Upon completion of the transaction, CVS Caremark will become one of the nation's largest providers of prescription drug services for Medicare beneficiaries enrolled in Medicare Part D. CVS Caremark will provide further details about the financial aspects of the transaction when it provides 2011 earnings guidance on its fourth quarter 2010 earnings call, scheduled for February 3, 2011.

The transaction is subject to customary closing conditions, including necessary regulatory approvals and is expected to close by the end of the second quarter. Universal American also operates a Medicare Advantage business, which will be spun off to Universal American shareholders as a separate company at the time of closing.

Medicare Part D is the federally subsidized prescription benefit programme provided to Medicare beneficiaries, citizens who are 65 years and older or who otherwise qualify through disability. Prescription drug coverage funded by Medicare is projected to be one of the fastest growing segments of the PBM market, given the nation's aging demographics and the growing trend to transition retiree coverage to Medicare funding.

CVS Caremark is the largest pharmacy health care provider in the United States. Through our integrated offerings across the entire spectrum of pharmacy care, we are uniquely positioned to provide greater access, to engage plan members in behaviours that improve their health and to lower overall health care costs for health plans, plan sponsors and their members.