Cigna to Buy Express Scripts, As Industry Continues to Consolidate

Xconomy National — 

Cigna, one of America’s largest health insurance providers, said Thursday it had agreed to acquire Express Scripts in a deal valued at $52 billion.

St. Louis-based Express Scripts (NASDAQ: ESRX) is the nation’s largest pharmacy benefit manager, or PBM. Organizations in that category manage prescription drug programs for commercial and government-provided health plans. Express Scripts said it’s responsible for the drug plans of more than 80 million patients in the U.S.

Cigna (NYSE: CI), based in Bloomfield, CT, said in its announcement that it was purchasing Express Scripts in a deal aimed at “making healthcare simpler” for its members, and at creating “an expanded portfolio of health services with greater choice.”

The deal between the two healthcare giants, which is expected to close later this year, continues a pattern of consolidation in the pharmacy and insurance industries.

Last fall, the health insurer Anthem (NYSE: ANTM) said it planned to launch its own in-house PBM in partnership with CVS Health (NYSE: CVS). CVS is one of Express Scripts’ chief rivals, along with OptumRx, part of Minnesota-based UnitedHealth Group (NYSE: UNH).

Then, in December, CVS announced plans to acquire another leading health insurance provider, Aetna (NYSE: AET), for $69 billion.

Thursday’s deal between Cigna and Express Scripts also comes on the heels of speculation that the e-commerce behemoth Amazon (NASDAQ: AMZN) could buy an exiting PBM, or launch its own service to administer drug plans. The prospect of the Seattle company reshaping the healthcare industry drew further attention in January, when Amazon said it was partnering with Berkshire Hathaway and JPMorgan (NYSE: JPM) to launch a not-for-profit joint venture focused on lowering healthcare costs.

The PBM model has drawn criticism from patients, government officials, and pharmaceutical companies, some of whom have suggested that Express Scripts may be “profiting from higher drug prices by keeping a percentage for themselves,” according to a New York Times report.

“Too often, we see situations where consolidated firms—the PBMs, the distributors, and the drug stores—team up with payors,” FDA commissioner Scott Gottlieb said Wednesday. “They use their individual market power to effectively split some of the monopoly rents with large manufacturers and other intermediaries rather than passing on the saving garnered from competition to patients and employers.”

Cigna and Express Scripts shareholders, who the companies said need to approve the acquisition before it can close, could echo some of Gottlieb’s concerns.

If the transaction is approved, the combined company would be named Cigna and be led by David Cordani, that company’s CEO, according to the release. Tim Wentworth, president and CEO of Express Scripts, would become president of Cigna, the companies said.

Shares in Cigna were trading at $172 a share when the closing bell rang on Thursday, down 11.5 percent from Wednesday’s close. Meanwhile, Express Scripts’ stock price finished the trading day up 8.6 percent, to $79.72 a share.