More on Mergers & Acquisitions

Cigna-Express Scripts deal unlikely to harm competition or consumers, DOJ says

The next expected approval is for CVS Health's $69 billion acquisition of Aetna.

Susan Morse, Managing Editor

The Department of Justice on Tuesday cleared Cigna's $67 billion acquisition of Express Scripts because it said the merger is unlikely to lessen competition in the sale of pharmacy benefit manager services.

Cigna's PBM business nationwide is small, the DOJ said.

At least two other large PBM companies and several smaller ones will remain in the market post-merger, the department said.

Also, Cigna's current PBM provider, OptumRx, will be free to compete for customers that purchase medical insurance from Cigna, the DOJ said.

The division said it looked at how the merger would affect Express Scripts' incentives to provide competitive PBM services to Cigna's rivals.

"The merger is unlikely to enable Cigna to increase costs to Cigna's health insurance rivals due to competition from vertically-integrated and other PBMs," the DOJ said.

Also, the merger is unlikely to lead to Express Scripts raising prices because that would result in the merged company losing PBM customers and not in Cigna gaining enough volume of additional health insurance business to offset the loss of PBM customers.

Now that the Cigna merger has been approved, the next expected DOJ approval is for the $69 billion proposal for CVS Health to buy Aetna.

"The Cigna-Scripts and CVS-Aetna deals are doing what everyone else in the healthcare space is doing right now, just on a grander scale – reacting to continued cost pressures from market forces like the ACA (Affordable Care Act), consumerism, and other industry players building scale against each other," said Brad Haller, director of West Monroe Partners and a mergers and acquisitions expert. "So the vertical integration we are seeing with retailers buying payers  and health plans buying prescription benefit plan providers is the way the industry is going. Now that the DOJ has approved and provided certainty, one would expect others to follow suit."

The DOJ blocked previous proposed horizontal mergers between Cigna-Anthem and Aetna-Humana. 

Vertical integration is now seen as the most viable way to manage costs in the healthcare system, especially as PBMs have morphed to play a larger role in negotiating prices with drug manufacturers.

Twitter: @SusanJMorse
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