Insurer Cigna to acquire Express Scripts for $52B
Health insurer Cigna reached a deal to acquire pharmacy benefits manager Express Scripts for about $52 billion as players inside and outside the industry jockey to transform the health care landscape.
The agreement is the latest step in a realignment of how insurance, drug benefits and health care are administered that has attracted titans from other sectors such as Warren Buffett, Jamie Dimon and Jeff Bezos.
The deal comes after drugstore chain CVS Health, which owns Express rival Caremark, signed a similarly significant deal to acquire Cigna competitor Aetna. It also comes amid mounting scrutiny of the role of pharmacy benefit managers, known as PBMs, in the cost of prescription drugs.
Taken together, the latest changes reflect a sector that is likely to continue evolving after Republicans and President Trump weakened Obamacare and business executives seek to contain health care costs.
“The whole space is in transformation,” said Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation at the University of Michigan. “It’s a very unsettled market.”
Some health care leaders have blamed PBMs as a driver of steep drug prices, saying the sector’s role in the distribution of medicine and management of drug benefits is an unnecessary layer of bureaucracy. PBMs contend they save billions of dollars a year by managing benefits efficiently.
The Cigna-Express Scripts deal comes against a backdrop of uncertainty over the prospective rise of an inno- vative new approach to health care by an alliance of Amazon.com, Berkshire Hathaway and JPMorgan Chase. Amazon CEO Bezos, Berkshire CEO Buffett and JPMorgan CEO Dimon have promised to shake up the health care sector by lowering costs and spurning profits.
The Cigna-Express Scripts deal will “accelerate the much-needed change from sick care interventions to health care,” CEO David Cordani said in a conference call. He said the company would better be able to address “the unique needs of the individual.”
And he promised to “generate meaningful savings in medical and pharmacy costs that will be preimarily passed through to our customers, clients and health care partners.”
The acquisition also comes about a year after Cigna’s deal to combine with insurer Anthem collapsed after antitrust officials sought to block the move.
Despite the company’s plans to cut
$600 million in administrative costs, Cigna investors weren’t pleased with the deal. The company’s stock fell 11% to
$171.99. Express Scripts shares rose 8% to $79.72.