UnitedHealth has snapped up ‘tech Cold War’ victim PatientsLikeMe (UHC)

UnitedHealth Group added PatientsLikeMe, a Cambridge, MA-based social network startup that connects patients to others with similar health conditions, to its growing menagerie of acquired firms, per CNBC.

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PatientsLikeMe has been searching for a buyer after US federal regulators forced its majority owner, Chinese genomics company iCarbonx, to divest its stake in the startup in April — actions that are part of the larger "tech Cold War" waging between the US and China, which has been a pain point for investors and developers alike.

Here’s what it means: UnitedHealth Group is on a buying streak and incorporating its purchases into Optum — its massive health services division — to further bolster growth.

Five of UnitedHealth’s last six acquisitions — excluding PatientsLikeMe and Equian— were folded into Optum. Both Equian and PatientsLikeMe are also expected to combine with Optum, with the latter likely to find a home within Optum’s population health management division.

The branch could leverage data generated by PatientsLikeMe’s users to fuel disease management research, while also pushing individuals toward Optum’s existing host of care management and wellness tools. Optum has also focused significant attention on building out OptumRx, the company’s pharmacy benefit manager (PBM): Just last year, Optum acquired pharmacy companies Genoa and Avella Specialty Pharmacy before quickly integrating them into its OptumRx ecosystem.

Optum’s ecosystem approach is paying off, as the six-year-old health services division has grown to be a major revenue source for UnitedHealth. Optum contributed nearly $24 billion in revenue for UnitedHealth in Q1 2019, 44% of total revenue and a 12% increase year-over-year (YoY). And OptumRx in particular was responsible for 24% of that revenue, a figure that’s expected to swell to 71% over the next five years.

The bigger picture: UnitedHealth isn’t the only payer using mergers and acquisitions (M&As) to propel growth — organizations across the industry have consolidated services to reduce costs and remain competitive.

Insurers have historically engaged in horizontal integration to expand their membership bases and double down on growing markets. For examples, shareholders voted Tuesday in overwhelming support of Centene’s $17 billion purchase of its smaller rival WellCare. The combined company will have an expanded membership base of 22 million people, compared with the 14 million reported by Centene at the end of 2018. The move will also help Centene move into government-funded care markets, where WellCare previously held an advantage.
And more recently, industry players have aggressively pursued vertical integration to cut costs and cover a patient’s entire health journey. We’ve discussed how Cigna’s acquisition of the country’s second largest PBM Express Scripts could shore up the payer’s defenses against the looming threat of Amazon. At the time, we thought that Cigna’s megamerger would pave the way for other M&As in the industry. However, recent reporting suggests that may not be the case: The CVS-Aetna megadeal has a difficult few months on the horizon, given the intense scrutiny of federal Judge Richard Leon.

While UnitedHealth has avoided major regulatory opposition to its acquisitions thus far, it’s unclear how long its shopping spree can last.I (Zach) wonder how long UnitedHealth can continue to skirt antitrust concerns, considering it will become increasingly difficult for independent pharmacies and providers to compete outside the "walled gardens" being erected by industry giants like UnitedHealth, Cigna, and Aetna.

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