Healtheon/WebMD Acquires Medical Transaction Processor for $2.5B

Internet healthcare company Healtheon/Web MD (Nasdaq: HLTH) announced today that it will acquire the ENVOY Corporation, a large provider of electronic data interchange (EDI) services to the healthcare industry, for approximately $2.5 billion (US$).

The Atlanta, Georgia-based Healtheon/Web MD said that the acquisition will allow it to process two billion medical, dental and patient statement transactions a year for its healthcare customers and physicians in its network.

ENVOY is a unit of Quintiles Transactional Corp. (Nasdaq: QTRN), a Triangle Park, North Carolina-based healthcare company that provides marketing solutions to pharmaceutical, biotechnology and medical device companies.

In 1999, Quintiles said that ENVOY’s network processed over 1.4 billion transactions involving approximately 250,000 physicians, 35,000 pharmacies, 47,000 dentists, 4,500 hospitals and 900 payers, including approximately 47 Blue Cross Blue Shield Plans, 59 Medicare Plans and 40 Medicaid Plans.

Under the terms of the deal, Quintiles will receive 35 million shares of Healtheon/WebMD stock, giving it a 16 percent equity stake. The company will also receive $400 million in cash from Healtheon/WebMD.

Developing New Products

Quintiles will also provide Healtheon/WebMD with $100 million in development funding over the next 18 months. The company plans to explore such developing Web-based products and services as drug development, physician detailing and direct-to-consumer information delivery.

The two companies also worked out an agreement to share royalties from the sale of de-identified data. Healtheon/WebMD guaranteed that personal information culled from patients would not be identifiable.

“The acquisition of ENVOY allows us to further our goal of using the Internet to facilitate a new system for delivering healthcare and position us as the market leader in payer connectivity,” said Healthcare/WebMD CEO Jeff Arnold.

Busy Day at the Office

Healtheon/Web MD also announced today that it has formed a strategic alliance with ChannelHealth, a subsidiary of the IDX Systems Corporation (Nasdaq: IDXC). Launched in October of last year, ChannelHealth enables doctors, patients, pharmacies, labs and others to have access to critical information.

Under the terms of the deal, ChannelHealth will receive $20 million in Healtheon/Web MD stock, while Healtheon/WebMD will become the exclusive provider of electronic transaction services to IDX’s network of 118,000 physicians nationwide. The two will also collaborate to develop Internet services for the process of managing clinical drug trials.

Healtheon/WebMD’s moves today provide more substance to its claim to be “the first end-to-end Internet healthcare company connecting physicians and consumers to the entire healthcare industry.” The company was formed last year after a $6.7 billion merger between Healtheon Corporation, WebMD, Inc., MEDE America and Medcast.

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