Published: Thu, September 20, 2018
Medicine | By Brett Sutton

DOJ Says Cigna Can Complete Merger Deal With Express Scripts 09/18/2018

The U.S. Justice Department has flashed a green light for the proposed merger of Cigna and Express Scripts, just six months after the two companies announced plans to join forces.

The Justice Department's six-month review found that the merger is "unlikely to result in harm to competition or consumers" due to Cigna's small nationwide PBM business and the preponderance of other PBMs in the market. "The other major insurers, UnitedHealth Group and Anthem, have also moved away from using outside benefit managers, posing major threats to CVS and Express Scripts", Abelson continues.

Officials at Bloomfield, Conn. -based Cigna and St. Louis-based Express Scripts have said their merger would drive higher quality care and affordability by offering insurance and pharmacy services under one roof.

Sources told Reuters the Justice Department's review may conclude soon, though it is not clear whether approval will come in September. The US Department of Justice has approved Cigna's $54 billion purchase of the pharmacy benefits management company.

"Both companies argue that the merger will benefit consumers by allowing Cigna and Express Scripts to better manage their customers' health by sharing information about both their medical and drug expenses". The majority of the cost savings that result from the tie-up will flow to customers and not shareholders, Cordani has said.

Tim Wentworth, the CEO of Express Scripts, echoed that sentiment, predicting the merger would help "transform health care".

Yesterday's approval "bodes well for the pending US antitrust review of CVS Health Corp's proposed $69 billion acquisition of health insurer Aetna Inc.", writes Reuter's Caroline Humer. Express Scripts negotiates prescription drug prices with pharmaceutical companies.

Cigna said it looked to buy a pharmacy benefit manager because the pharmacy benefit is used nearly twice as frequently as the next closest health care benefit and represents about 20 percent of employer-based insurance benefits. The deal is described as a "vertical merger", meaning it involves companies at different points in the supply chain that do not directly compete for customers.

Cordani said the Express Scripts deal presented an opportunity for immediate value creation and he said profit should be up in the "mid-teens" in the first year. That's because it indicates that the Justice Department likely isn't concerned about consolidation among insurers and pharmacy-benefits managers, which aren't direct competitors.

Cigna and Express Scripts said Monday that they expect the deal to close by the end of 2018.

Cigna shares closed up 1.4 percent at $197.84, while Express Scripts shares closed up 3.7 percent at $95.23.

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