OptumRx and OptumInsight May Witness Robust Growth Trends in 2017

In 1Q17, UnitedHealth Group’s (UNH) Optum business reported $21.2 billion in revenues, which represents year-over-year (or YoY) growth of around 7.9%. This business also witnessed a 15.6% YoY rise in earnings from operations, which totaled ~$1.3 billion in 1Q17.

Optum also demonstrated a YoY improvement of 40 basis points in its operating margins in 1Q17. Its strong operational and financial performance in 1Q17 is indicative of the robust growth trends for all segments of the Optum business for fiscal 2017. To learn more about Optum, please read What are UnitedHealth Group’s key business segments?

If Optum continues to post solid financial results, it can positively impact UnitedHealth Group’s stock price as well as the iShares Core S&P 500 ETF (IVV). UnitedHealth Group makes up about 0.82% of IVV’s total portfolio holdings.

In 1Q17, pharmacy benefit manager (or PBM) OptumRx witnessed a 5% increase (or 15 million) in total prescriptions fulfilled on a YoY basis. In March 2017, Health Transformation Alliance (or HTA), a non-profit entity that represents 38 private-sector employers, announced its plan to enter a three-year contract with two major PBMs—OptumRx and CVS Health.

This contract implies that HTA would be directing a significant part of the 38-employer PBM business to OptumRx. A superior data and analytics platform has been a key reason for HTA to prefer OptumRx over other PBMs. To learn more about OptumRx, please read OptumRx manages UNH’s pharmacy benefit management business.

In 1Q17, OptumInsight saw a rise of $2.1 billion in its revenue backlog in the last 12 months, which was greater than its $1.5 billion in revenues that were attributed to 1Q17. The alignment of patient data and analytics with UnitedHealth Group’s care delivery capabilities has helped UnitedHealth Group provide improved service at a lower cost. To learn more about OptumInsight, please read UnitedHealth Group’s OptumInsight – improving medical care

OptumHealth’s health savings accounts have been selected by Empower Retirement, the second-largest retirement plan administrator in the US.

These developments have further strengthened Optum and enabled UnitedHealth Group to pose tougher competition to peers such as Aetna (AET), Cigna (CI), and Anthem (ANTM).

In the final article in this series, we’ll discuss enrollment trends for UnitedHealth Group in 1Q17.