September 18, 2018

DOJ OKs proposed Cigna-Express Scripts merger

Daily Briefing

    Health insurer Cigna and Express Scripts, the largest prescription benefits manager (PBM) in the United States, on Monday announced the Department of Justice has cleared the companies' proposed merger.

    Read Advisory Board's take on Cigna's proposed merger with Express Scripts

    The deal, which is scheduled to close later this year, has already received board approval from both companies, but is still subject to state regulatory approval.

    The companies said the deal, which is valued at $54 billion, aims to curb health care costs by coordinating pharmacy and medical claims under one organization while giving the combined company more leverage when negotiating prices with drugmakers.

    If the deal goes through, the combined company would be called Cigna and would be based in Bloomfield, Connecticut—where Cigna has its headquarters. The Express Scripts business would keep its St. Louis headquarters. Cigna CEO David Cordani would lead the combined company as president and CEO, while Express Scripts CEO Tim Wentworth would be president of the Express Scripts business. The combined company would have a board of 13 directors, four of whom would be "independent members of the Express Scripts board," according to an announcement.

    DOJ clears Cigna-Express Scripts merger

    Makan Delrahim, assistant attorney general of DOJ's antitrust division, in a statement said, "After a thorough review of the proposed transaction, the antitrust division has determined that the combination of Cigna … and [Express Scripts] … is unlikely to result in harm to competition or consumers."

    Delrahim said DOJ's antitrust division conducted a six-month investigation to examine whether the proposed merger would substantially reduce competition in the PBM sales market or increase the costs of PBM services for other health insurers. For the investigation, DOJ's antitrust division analyzed transactional data from the two companies and other industry firms, interviewed more than 100 industry participants, and reviewed more than two million documents.

    Delrahim said DOJ's antitrust division determined, "The merger is unlikely to lessen competition substantially in the sale of PBM services because Cigna's PBM business nationwide is small."

    Delrahim said the antitrust division also determined "the proposed transaction is unlikely to lessen competition substantially in markets for certain customers because at least two other large PBM companies and several smaller PBM companies will remain in the market post-merger." Delrahim said, "In evaluating whether the merger may harm competition for the sale of PBM services, the division understands that Cigna intends to use [Express Scripts] for PBM services and that Cigna's current PBM services provider, UnitedHealthcare's subsidiary Optum, will be free to compete for PBM customers that purchase medical insurance from Cigna upon closing of the transaction."

    The Daily Briefing is published by Advisory Board Research, a division of Optum, which is a wholly owned subsidiary of UnitedHealth Group. UnitedHealth Group separately owns UnitedHealthcare.

    What's next?

    The proposed merger is still subject to approvals from state regulators. According to Forbes, insurance regulators in 29 states must clear the proposed merger before the companies can close the deal. So far, the deal has approval from departments of insurance in 16 states, according to the Wall Street Journal Journal. The companies said they are working with regulators in the remaining states to clear the merger (Abelson, New York Times, 9/17; Nakrosis, Wall Street Journal, 9/17; Japsen, Forbes, 9/17; Livingston, Modern Healthcare, 9/17; Weixel, The Hill, 9/17; Wilkerson, InsideHealthPolicy, 9/17; DOJ release, 9/17).

    Next, learn how mega-mergers could impact your organization

    Health care mergers and acquisitions are hardly new, but many recent transactions involve vertical integration: new-in-kind combinations of major players resulting in unprecedented scale and scope.

    Use this research report to plan for integrators' possible moves, forecast potential effects on your organization, and create a plan to defend against or capitalize on the changes.

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