Cigna to Acquire Pharmacy Benefit Manager Express Scripts

Major insurance company, Cigna, announced plans yesterday to acquire pharmacy benefit manager (PBM) Express Scripts for $67 billion. The merger will consist of $48.75 billion in cash and 0.2434 shares of stock of the combined company per Express Scripts share, in addition to Cigna's absorbing approximately $15 billion worth of Express Scripts’ debt.

“This combination accelerates Cigna’s enterprise mission of improving the health, well-being and sense of security of those we serve, and in turn, expanding the breadth of services for our customers, partners, clients, health plans, and communities,” said David Cordani, president and CEO of Cigna, in a statement.

“We believe this transaction delivers attractive value to the Express Scripts shareholders. Together, our [2] organizations will help make the healthiest choices the easiest choices, putting health and pharmacy services within reach of everyone we serve,” added Tim Wentworth, president and CEO of Express Scripts. “We are positioned to transform healthcare.”

This merger is the most recent in a series of deals between PBMs and insurers. Late last year, CVS Health, which already owns and operates a PBM of its own, announced a $69 billion acquisition of Aetna, a deal that could provide the company with an annual revenue of $240 billion. Industry analysists said at the time that the deal would send a ripple through the healthcare industry, creating a “behemoth healthcare company” with significant market power, because a combined CVS—Aetna could impact most basic health services that consumers regularly use.

A month after the announcement of the CVS—Aetna deal, in January 2018, Amazon, Berkshire Hathaway, and J.P. Morgan Chase put out a statement indicating that they were partnering to form an independent healthcare company to serve their US employees. The companies jointly announced that they will pursue this objective through an independent company that is “free from profit-making incentives and constraints.”

Another top insurer, UnitedHealthcare, owns the PBM OptumRx; the top 3 PBMs by market share will now be owned by insurers, whereas a year ago, only 1 was. Such market consolidation was decried this week by FDA Commissioner Scott Gottlieb, MD, who said "Too often, we see situations where consolidated firms—the PBMs, the distributors, and the drug stores—team up with [payers]. They use their individual market power to effectively split some of the monopoly rents with large manufacturers and other intermediaries rather than passing on the saving garnered from competition to patients and employers."

Earlier this week, UnitedHealthcare announced a plan to provide consumers with discounts generated through its manufacturers’ rebates, though stakeholders remain cautious about the actual impact of this plan; PBMs are not legally obligated to disclose the exact amount of discount they receive, so these savings could fail to make it back to the patient.