Icahn Blasts Cigna Deal for PBM as ‘Travesty’

The investor urges Cigna shareholders to reject the acquisition of Express Scripts, calling it potentially “one of the worst blunders in corporate ...
Matthew HellerAugust 7, 2018

Activist investor Carl Icahn has launched an effort to derail Cigna’s $52 billion takeover of pharmacy benefit manager Express Scripts, warning the deal might become “one of the worst blunders in corporate history.”

In an open letter to Cigna shareholders, Icahn said the health insurer is “dramatically overpaying for a highly challenged Express Scripts” that is facing “existential risks” from potential regulatory change and competition from Amazon.

Cigna shareholders are scheduled to vote on the acquisition Aug. 24. “It’s a travesty to complete this deal,” Icahn said. “Paying an over 50% premium to a company whose very existence may be challenged is a potentially massive destruction of Cigna shareholder value.”

According to Reuters, Icahn owns about 0.56% of the outstanding shares of Cigna and also has a short position on Express Scripts.

Cigna announced in March it would buy Express Scripts for $48.75 a share in a move to cut rising healthcare costs. Analysts have said the deal will allow Cigna to wield significant pricing power and leverage major scale advantages.

Icahn said that at the time the deal was announced, “there were at least arguments that could be made by management to try to persuade us into thinking that it was not completely ridiculous.” But he argued there was no longer a rationale for the deal because of recent events including “Amazon’s almost certain entrance as a competitor to Express Scripts.”

The e-commerce giant in June bought online pharmacy PillPack, putting it in direct competition with drugstore chains, drug distributors and PBMs.

Icahn also noted that the Trump administration has launched a “direct challenge” to the “highly flawed rebate system” under which PBMs negotiate rebates on drug prices with manufacturers.

“Purchasing Express Scripts may well become one of the worst blunders in corporate history, ranking up there with the Time Warner/AOL fiasco and General Electric’s long-running string of value destruction,” he said.

According to Reuters, “Analysts do not expect shareholders to support Icahn, noting that few shareholders have questioned the strategic rationale of the deal.”

“We … remain confident in the deal,” an Express Scripts spokesman said.