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Executive Summary

VALUE HEALTH PURCHASING HEALTH CARE CONSULTING FIRM LEWIN-ICF as part of an acquisition spree announced by the Avon, Conn.-based managed care company on Nov. 2. Value Health noted that it has signed "binding documents to acquire Lewin-ICF, the nation's leading health policy and management consulting organization, from ICF International." Neither ICF or Value Health disclosed the terms of the sale, which is expected to be completed by Nov. 30. Lewin-ICF generates approximately $17 mil. in revenues annually from its professional staff of 75, ICF reported in a separate Nov. 2 release. The firm will remain in Fairfax, Va., with a branch office in San Francisco. Once the merger is completed, the firm will take on the new name Lewin-VHI Inc. Lewin-ICF Chairman and CEO Lawrence Lewin and President and COO Robert Lewin, MD, will hold the same positions after the merger. The firm, which has worked with the Pharmaceutical Manufacturers Association on a number of issues since its formation in 1987 with the merger of Lewin & Assoc. and ICF's health consulting business, moved into the national spotlight during the recent presidential campaign. A Lewin-ICF non-partisan study of the candidates' respective health plans, contracted by Families USA, received widespread news coverage and was cited by President-elect Clinton during the debates to support the superiority of his plan over President Bush's. Among the projects Lewin-ICF has performed for PMA was a 1988 report on the effect of cost controls on patient access to new technologies. Lewin-ICF has conducted studies in the pharmaceutical area for other groups as well, including a study on the Medicare Catastrophic Act for the American Hospital Association and recent study on drug costs for Families USA ("The Pink Sheet" Sept. 14, In Brief). Explaining the rationale for the acquisition, President and CEO Robert Patricelli said Value Health is looking to Lewin-ICF "to help us understand the business opportunities inherent in health policy changes at the federal and state levels, and to assist in developing our current products for use in the public and provider sectors where Lewin-ICF has established consulting practices." ICF International's divestiture of Lewin-ICF is consistent with the company's stated aim of moving out of the health care area. Last February, ICF sold off Health & Sciences Network (formerly Hospital Satellite Network) and Health & Sciences Communications to a group of Washington area investors. Value Health's other recent acquisition deals include the purchase of the mail-order drug business Stokeld Health Services, acquisition of an 8% stake in the pharmacy PPO Complete Pharmacy Network (CPN), and the purchase of Wellington Life Insurance Co. Value Health is putting the total cost of the four purchases at about $36 mil. in cash. In Davenport, Iowa-based Stokeld, Value Health is getting a mail-order pharmaceutical business with approximately $30 mil. a year in sales and "almost 800,000 covered lives," the company noted. The purchase supplements Value Health's existing mail-order business with United Technologies and Rockwell Industries, which generates about $10 mil. in revenues a year. The merger of the two businesses, Patricelli said, "will permit us to offer fully integrated retail pharmacy and mail order programs to our customers." The Cleveland-area pharmacy preferred provider program, CPN, currently provides prescription drug management services for 570,000 lives in over 70 employer and HMO groups with about $65 mil. in annual claims. Value Health has an option to acquire all of CPN in the autumn of 1993. Wellington Life, based in Arizona, is a shell insurance company with licenses in 33 states. Value Health plans to use the licenses to cover insurance products that it will offer to its customers. Value Health estimates that the newly acquired businesses will add approximately $60 mil. in revenues in 1993 assuming the company exercises its option to acquire CPN at the beginning of the fourth quarter. Value Health reported third quarter revenues of $64.1 mil., up 60%, including $42.5 mil. in sales from prescription drug managed care programs. Nine month revenues were up 71% to $183.6 mil., putting the company on track for 1992 revenues in the ballpark of $250 mil.

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