Reports: WellPoint may look to sell PBM business

INDIANAPOLIS (AP) — Health insurer WellPoint Inc. may be shopping its pharmacy benefit management business, according to news reports, a move that would be applauded by some analysts following the company.

The business mainly serves WellPoint's 12 million commercial fully insured customers and generates "a significantly lower margin" than larger pharmacy benefits competitors, such as Medco Health Solutions Inc., according to a note from Wachovia analyst Matt Perry.

"This is an issue that investors have been asking the company about over the last several quarters," he wrote.

Perry wrote that he thinks the unit's value has not been properly reflected in WellPoint's share price. A sale could unlock unrecognized value and allow WellPoint to focus more on health insurance.

WellPoint spokeswoman Cheryl Leamon declined to comment on the reports. She said the company doesn't discuss "rumors."

Goldman Sachs analyst Randall Stanicky said in a separate note the speculation raises questions about whether other managed-care companies with captive pharmacy benefit management businesses may follow suit.

"For WellPoint, we believe a divestiture would provide an opportunity to leverage considerable valuation difference between PBMs and managed care," he wrote.