Vital Signs: G'Bye HealthExtras, Hello Catalyst

Vital Signs is our new blog-in-a-blog on the Washington area's biotech and health care scene.

By Kendra Marr

After more than a decade in business, HealthExtras decided that it was time to change its name.

No, there isn't a merger. This isn't some attempt to cover up a scandal. And the Rockville firm certainly isn't departing from its core business of managing pharmacy benefits.

It's just that the company has outgrown its original brand.

This week HealthExtras became Catalyst Health Solutions, and its ticker symbol changed from HLEX to CHSI.

"It was no easy feat," said Joanna Ficklin, Catalyst's vice president of sales administration and marketing.

Founded in 1997, HealthExtras started as a small office in Rockville and a handful of employees. In those days, it was known for selling supplemental insurance, mainly health and disability benefits, on the Internet.

But in 2001, that business model began to change. HealthExtras made a strategic investment to acquire an 80 percent interest in CatalystRx, a Las Vegas firm that managed pharmacy benefits for large employee groups, managed-care organizations and third-party administrators. HealthExtras paid CatalystRx $11 million in cash and thousands of shares of newly issued HealthExtras stock then-valued at $2.3 million.

The following year, HealthExtras purchased the outstanding 20 percent for thousands more shares of HealthExtras stock, then-valued at $1.1 million, and notes payable of $4.2 million.

The acquisition soon overshadowed the company's other subsidiaries, including HospiScript Services, which provides pharmacy benefit management services to the hospice industry, and Immediate Pharmaceutical Services, a prescription mail service facility based in Avon Lake, Ohio.

Today, CatalystRx accounts for nearly all of HealthExtras's revenue. What started as a small slice of HealthExtras's overall business has propelled the company's services nationally and grown its workforce to more than 800 employees.

HealthExtras signed Iowa-based Wellmark, its first Blue Cross Blue Shield client in 2006 The contract was the company's largest and the first to total more than 1 million members.

Last year HealthExtras became the country's fourth-largest publicly traded pharmacy benefit manager through its acquisitions and new clients, which included Maryland state employees and Medical Card Systems, a major managed-care company in Puerto Rico.

Today CatalystRx has more than 5 million members, who have access to about 60,000 pharmacies across the country.

"When we go out into the marketplace people -- whether its a member or a broker or a perspective client -- they ask us this question: 'Help us understand the difference. CatalystRx vs. HealthExtras?,'" said Nick Grujich, Catalyst's chief operating officer. "It was just so confusing. We just wanted to provide absolute clarity. So when people walk around with the CatalystRx card in their wallet, they tie that into our corporate identity."

So in that push to be more consumer friendly, the board of directors voted on changing the name to Catalyst Health Solutions.

On Oct. 1, the first day of trading under the new name, a Nasdaq technical glitch temporarily caused its stock drop erroneously. But after the correction, it fell about 3 percent, closing at $25.42.

The new Web site is up and running, and the company has issued new Catalyst-branded business materials.

"Things that said HealthExtras were luckily materials that were electronically based, so we just had to update that," said Ficklin.

But aren't there tons of discarded HealthExtras business cards? Mounds of HealthExtras-branded swag?

"This was something we've been planning for a while," Ficklin said. "So over time we were cognizant not to have much left over."

By Dan Beyers  |  October 3, 2008; 12:50 PM ET  | Category:  Vital Signs
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