The Department of Justice on Monday approved a $60 billion merger between Cigna and Express Scripts, a transaction that could help reshape the healthcare industry at a time when the Trump administration is focused on lowering drug costs.
The deal between the top insurer and middleman pharmacy benefit manager is expected to close by the end of 2018 but clearance is pending in several states, the companies said in a statement.
“We are pleased that the Department of Justice has cleared our transaction and that we are another step closer to completing our merger and delivering greater affordability, choice and predictability to our customers and clients as a combined company,” said David Cordani, chief executive officer of Cigna.
In reviewing the deal, the DOJ said it analyzed whether the merger would hinder competition among pharmacy benefit managers or raise costs for rival health insurance companies who rely on the middlemen to create drug formularies and negotiate price discounts, among other services. .
“The merger is unlikely to lessen competition substantially in the sale of PBM services because Cigna’s PBM business nationwide is small,” Assistant Attorney General Makan Delrahim said in a statement. “The proposed transaction is unlikely to lessen competition substantially in markets for customers because at least two other large PBM companies and several smaller PBM companies will remain in the market post-merger.”
Top activist investor Carl Icahn previously sought to sink the deal, arguing that Cigna was overpaying for Express Scripts given the increased heightened scrutiny over the company’s business model. He later dropped his opposition and shareholders for both businesses approved the transaction.
A combined Cigna-Express Scripts will likely wield greater influence in negotiations with pharmaceutical companies over drug price discussions. It remains to be seen, however, how President Trump’s effort to reign in rising treatment costs will impact the new business.
The White House is currently weighing a new proposal that is expected to make significant changes to the current drug rebate program. Insurers and pharmacy benefit managers claim the system ultimately lowers costs for consumers, while pharmaceutical manufacturers argue the two industries unfairly profit off the rebates to the list price of a drug.
“Together, we believe we will be able to do even more to reduce healthcare costs, expand choice, and improve patient outcomes,” Tim Wentworth, chief executive officer at Express Scripts, said in a statement.
Express Script’s stock was up 3.72 percent to $95.24 per share in New York trading, while Cigna’s rose 1 percent to $197.20 per share on the news.
The federal government is in the midst of reviewing a similar $69 billion deal between pharmacy benefit manager CVS Health and insurer Aetna.
