Home»Companies»Cigna: Acquisition of Express Scripts to Drive Health Costs Down

Cigna: Acquisition of Express Scripts to Drive Health Costs Down

Print This Post

Cigna in March 2018 announced it will acquire pharmacy benefit manager Express Scripts in a $67 billion cash and stock deal.  According to Cigna CEO David Cordani, the merger “will drive health care costs down while improving the quality of care.” The proposed merger would allow Cigna to lower its costs by in-sourcing pharmacy benefit management (PBM) services, and to absorb Express Scripts’ profits.

How can Cigna lower its PBM costs and keep its newly acquired PBM unit’s profits up at the same time defies logic. It sounds like having one’s cake and eating it, but we agree in advance that this publication must have missed something. Perhaps Cigna is not a significant Express Script client today. In that case, another PBM may soon lose a very large client.

Together, Cigna and Express Scripts would have revenues of $142 billion. The combined company in theory should be in a position to negotiate better prices from drug makers at a time when drug costs are rising fast. Retail prescription drug costs accounted for about 12% of total U.S. healthcare spending in 2015. However, whether any rebates, should they ever materialize, would be passed on to health plans and contracted employers, is anyone’s guess.

On the bright side, the merger will allow Express Scripts to tap into Cigna’s pool of customers. And, it may be easier to get approval from regulators for the proposed deal that for the attempted Cigna combination with Anthem which was blocked by U.S. courts in 2017.

A Defensive Move?

In our opinion, a key driver for the proposed move may be that Cigna’s major competitors Aetna and UnitedHealth already are integrated with PBMs. Aetna is being acquired by CVS Health and UnitedHealth owns Optum Rx. It is possible that Cigna believes it needs to follow suit for defensive reasons. Should the other two combinations really result in a major competitive advantage, it would leave a non-integrated Cigna in the proverbial cold.

The failed Cigna-Anthem merger has resulted in frustration and bad blood, with billion-dollar lawsuits now being heard. The successful acquisition of the largest PBM in the U.S. would steer Cigna back onto a much more positive course.

Previous post

Ascensus acquires Chard Snyder as it expands to CDH and EB Admin Markets

Next post

Predictive HR allies with TrenData, secures first-round funding