Medco Health Solutions Inc. announced it is to acquire the largest U.S. supplier of diabetes treatment products, PolyMedica Corp. Medco is to pay $1.5 billion in cash, or a $53-per-share price which represents a 17 percent premium to Wakefield, Mass.-based PolyMedica's closing stock price on Monday.

About 5 percent of the United States population, which amounts to around 21 million people, is diabetic, and their treatment is accounting for about 15 percent of total drug spending across the nation. Medco Health Solutions Inc. is the biggest U.S. manager of drug benefits, and the acquisition will enable it to significantly drive down costs for the diabetes, especially for employers which rely on Medco to administer drug benefits to people enrolled in corporate health plans.

Medco will also assume $180 million in convertible debt and $33 million in a revolving-credit facility. PolyMedica has about 1 million customers which use its home delivery services of diabetes medicines plus strips and meters to test blood sugar.

The announced transaction was unanimously approved by both companies' boards, and should close sometime later this year. The deal is subject to approval by PolyMedica's shareholders.

Medco Health Solutions, Inc. formed in August 2003 as a spinoff from Merck & Co. and it was ranked 54th on the Fortune 500 list as of this year.