Cardinal Health: Unexpected Loss of OptumRx’s Contract Raises Concerns for Near-Term Future

Narrow-moat Cardinal Health reported this morning that its contract with UnitedHealth Group’s Optum Rx will not be renewed. Cardinal signed a multiyear contract with Optum in June 2015 to supply generic and branded pharmaceuticals to Optum’s mail and specialty pharmacies. It was set to expire in June 2024. Over the past three fiscal years, Optum served as a key customer for Cardinal, making up 15%, 16%, and 16% of its total sales, respectively. According to the Drug Channels Institute, Optum Specialty Pharmacy made up roughly 13% of overall prescription revenue from specialty drugs in the US in 2023. On the news, the stock dropped approximately 5%.