Cigna to Buy Express Scripts in Big PBM Move

The $54 billion deal is the latest move by an insurer to cut health care costs by bringing pharmacy benefits and medical claims under one roof.
Matthew HellerMarch 8, 2018

In another alliance of an insurer and a health care company, Cigna said Thursday it would acquire Express Scripts, the nation’s largest pharmacy benefits manager, for about $54 billion.

The deal mirrors CVS Health’s move in December to take over Aetna in a $69 billion mega-merger that is expected to boosts its pharmacy benefit management (PBM) business. Pharmacy benefits are increasingly being combined with medical insurance plans.

Cigna already has a PBM tie-up with UnitedHealth’s Optum unit but insurers have been under increasing pressure to lower health care costs by bringing pharmacy and medical claims under one roof. Express Scripts, the last major independent pharmacy benefit manager, is responsible for the prescription plans of more than 80 million Americans.

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“We’re seeing a lot of vertical integration,” Brian Marcotte, chief executive of the National Business Group on Health, which represents large employers, told The New York Times. With insurers looking to operate their own pharmacy benefit managers, “it seemed like this was the next logical shoe to drop.”

Cigna’s offer consists of $48.75 in cash and 0.2434 shares of stock of the combined company for each Express Scripts share, amounting to $96.03 per share — a premium of nearly 31% to Express Scripts’ Wednesday closing price.

As CNBC reports, the wave of consolidation in the health care sector also reflects changes in the Affordable Care Act, rising drug prices, and the threat of competition from Amazon, which is planning to combine with Berkshire Hathaway and JPMorgan Chase to cut health costs for hundreds of thousands of their employees.

“It is possible that the threat of an Amazon entry into the healthcare and possibly the drug supply chain landscape … has spurred Cigna and Express Scripts to tie the knot,” said Leerink Partners analyst Ana Gupte.

Express Scripts CEO Tim Wentworth said the deal would put “health and pharmacy services within reach of everyone we serve. Adding our company’s leadership in pharmacy and medical benefit management, technology-powered clinical solutions, and specialized patient care model to Cigna’s track record of delivering value through innovation, we are positioned to transform healthcare.”