By Alex Kacik | August 24, 2018
Cigna shareholders voted to
approve its proposed $67 billion merger with
Express Scripts Friday.
Cigna aims to merge with the No. 1 pharmacy benefit manager for $52 billion in cash and would assume $15 billion in Express Scripts' debt. The combined Cigna-Express Scripts company would have $141.7 billion in revenue. The deal is expected to be completed by the year's end, following state and federal regulators' approval.
Executives said that scale will allow them drive higher quality and affordability, while critics argue that the deal is primarily profit-motivated and that it wouldn't benefit consumers.
"Our combined company will enhance Cigna's differentiated service-based model, fueled by actionable insights and analytics, to drive innovation and meaningful growth in a highly dynamic market environment. As a result, we will build more effective partnerships, further improve health outcomes and deliver a superior customer experience," David Cordani, president and CEO of Cigna, said in a statement.
Express Scripts and Cigna picked up on the vertical integration theme in healthcare, particularly after regulators rebuffed proposed combinations between major insurers including Cigna and Anthem. Now insurers are teaming up with PBMs or creating their own as they look to optimize claims and coverage data to better manage patient care.
Activist investor Carl Icahn initially criticized the combination, saying that Cigna is "dramatically overpaying" for Express Scripts. But Icahn since changed his tune since two independent advisory firms recommended voters approve the deal.
The current rebate model, where drug companies give discounts to pharmacy benefit managers to make their products the only ones available to consumers or make the co-pay less than competing drugs, is under fire, which adds some uncertainty into the pharmaceutical supply chain financial framework.
Food and Drug Administration Commissioner Scott Gottlieb wants to eliminate rebates, which he believes inflate drug prices. PBMs are paid in part by the spread between what it bills to the payer for medications and what it pays the pharmacy to dispense those drugs, which can incentivize higher list prices.
Although critics argue that going after rebates doesn't directly address the root cause of high drug prices.
Express Scripts shareholders plan to vote on the merger Friday as well.
Cigna aims to merge with the No. 1 pharmacy benefit manager for $52 billion in cash and would assume $15 billion in Express Scripts' debt. The combined Cigna-Express Scripts company would have $141.7 billion in revenue. The deal is expected to be completed by the year's end, following state and federal regulators' approval.
Executives said that scale will allow them drive higher quality and affordability, while critics argue that the deal is primarily profit-motivated and that it wouldn't benefit consumers.
"Our combined company will enhance Cigna's differentiated service-based model, fueled by actionable insights and analytics, to drive innovation and meaningful growth in a highly dynamic market environment. As a result, we will build more effective partnerships, further improve health outcomes and deliver a superior customer experience," David Cordani, president and CEO of Cigna, said in a statement.
Express Scripts and Cigna picked up on the vertical integration theme in healthcare, particularly after regulators rebuffed proposed combinations between major insurers including Cigna and Anthem. Now insurers are teaming up with PBMs or creating their own as they look to optimize claims and coverage data to better manage patient care.
Activist investor Carl Icahn initially criticized the combination, saying that Cigna is "dramatically overpaying" for Express Scripts. But Icahn since changed his tune since two independent advisory firms recommended voters approve the deal.
The current rebate model, where drug companies give discounts to pharmacy benefit managers to make their products the only ones available to consumers or make the co-pay less than competing drugs, is under fire, which adds some uncertainty into the pharmaceutical supply chain financial framework.
Food and Drug Administration Commissioner Scott Gottlieb wants to eliminate rebates, which he believes inflate drug prices. PBMs are paid in part by the spread between what it bills to the payer for medications and what it pays the pharmacy to dispense those drugs, which can incentivize higher list prices.
Although critics argue that going after rebates doesn't directly address the root cause of high drug prices.
Express Scripts shareholders plan to vote on the merger Friday as well.
Alex
Kacik is the hospital operations reporter for Modern Healthcare in Chicago.
Aside from hospital operations, he covers supply chain, legal and finance.
Before joining Modern Healthcare in 2017, Kacik covered various business beats
for seven years in the Santa Barbara, California region. He received a
bachelor's degree in journalism from Cal Poly San Luis Obispo in Central
California.
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