Cigna buying Express Scripts for $67B
In another mega deal to reshape the business of negotiating drug prices, health insurer Cigna said Thursday that it will acquire Express Scripts Holding, the nation’s largest pharmacy benefit manager, in a package valued at $67 billion.
Pharmacy benefit managers, or PBMs, negotiate drug prices on behalf of employers and insurers and have increasingly been brought in-house by insurers.
In December, CVS Health, a major PBM, announced it would acquire the insurer Aetna.
Thursday’s deal is significant because it will bring Express Scripts, the last major standalone PBM, under the umbrella of an insurer. Express Scripts has about 3,000 clients, including employers, health insurers and government health plans and serves 83 million Americans. Cigna has 15.9 million medical members across the globe.
Bloomfield, Conn.-based Cigna will pay $48.75 in cash and a portion of stock in the combined company for each share of St. Louisbased Express Scripts. Cigna shareholders will wind up owning about 64 percent of the company, which Cigna CEO David Cordani will lead. His Express Scripts counterpart, Tim Wentworth, will stay on as a president.
The total scope of the deal is $67 billion, including about $15 billion of Express Scripts debt.
Shares of both companies careened in opposite directions Thursday. Cigna’s stock fell 11.4 percent, or $22.25, to close at $172.00 in trading. Express Scripts climbed 8.6 percent, or $6.30, to $79.72.
The companies say the deals reflect an evolution in health care, toward a payment system that is linked to people’s health outcomes.
Cigna CEO David Cordani gave the example of a woman who becomes injured at work and is prescribed painkillers. Separately, the patient may become depressed and be prescribed psychotropic medications, unbeknownst to her primary care doctor. The combined company, he said, would be able to use real-time data to flag such cases and “complete a picture of the whole person —and help that primary care physician more actively treat the mind and body, potentially modify her pain management,” he said.
The PBM industry is in upheaval just as it has become a target of criticism over the role it plays in drug prices. The current financial incentives could lead PBMs, which make money off the drug discounts they negotiate, to prefer drugs with high list prices and high rebates, instead of lower prices.
In a speech this week at a national conference organized by the health insurance lobby, Food and Drug Administration commissioner Scott Gottlieb criticized the consolidated PBM industry and lashed out against a system “that obscure(s) profit taking across the supply chain that drives up costs; that exposes consumers to high out-of-pocket spending; that actively discourages competition.”
A paper released by the White House’s Council of Economic Advisers in February highlighted concerns about how concentrated the industry had become, with three PBMs accounting for 85 percent of the market.
Four of the nation’s largest health insurance companies have tried in the past to grow through mergers with one another — and failed due to antitrust concerns.
In contrast, these vertical mergers that bring together companies with different health care functions have been seen as having a better chance.
The major insurers have made moves to bring drug negotiation in-house. UnitedHealth Group owns its PBM, Optum Rx. CVS, a major PBM, is acquiring Aetna. Anthem broke up with Express Scripts to start its own PBM, IngenioRx.
The deal is expected to close at the end of the year.
Associated
Press
contributed.