The Antitrust Division of the United States Department of Justice (DOJ) has cleared the pending merger between Cigna Corporation and Express Scripts Holding Company, the companies announced in a statement issued today.
Bloomfield, Conn.-based Cigna, the fifth largest health insurer, announced in early March its plans to buy the nation’s largest stand-alone pharmacy benefit manager (PBM) in a $67 billion deal. Express Scripts, based in St. Louis, is responsible for the prescription plans of more than 80 million Americans.
The Justice Department’s clearance of the Cigna-Express Scripts deal comes before the DOJ announced any approval of the CVS Health acquisition of Aetna, which was announced several months. If both deals close successfully, the nation’s largest PBMs will all be aligned with the three largest payers, creating impressive, vertically-integrated healthcare entities.
“After a thorough review of the proposed transaction, the Antitrust Division has determined that the combination of Cigna, a health insurance company, and ESI, a pharmacy benefit management company, is unlikely to result in harm to competition or consumers,” Assistant Attorney General Makan Delrahim of the Antitrust Division of the U.S. Department of Justice said in a statement.
“During the Antitrust Division’s comprehensive, six-month investigation, it received over two million documents, analyzed transactional data from the merging companies and other industry firms, and interviewed over 100 knowledgeable industry participants,” the Justice Department stated.
The antitrust regulators said that, in particular, they analyzed whether the merger would substantially lessen competition in the sale of PBM services or raise the cost of PBM services to Cigna’s health insurance rivals. The merger is unlikely to lessen competition substantially in the sale of PBM services because Cigna’s PBM business nationwide is small, the DOJ stated. “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 Justice Department stated.
In the past year, there has been a wave of PBM and insurer integrations, vertical mergers and acquisitions. This past December, CVS Health, which has both pharmacy and PBM capabilities, announced plans to acquire leading health insurer Aetna for $69 billion. Days after news of the Cigna/Express Scripts merger, Centene Corporation announced it had made a major investment in RxAdvance, a cloud-based PBM led by former Apple CEO John Sculley. If the CVS Health-Aetna deal is approved it will be the largest ever in the health insurance industry. Another huge retail-health insurer deal could be in the works as there have been reports that Walmart Inc. is in preliminary talks to buy insurer Humana.
As reported by Healthcare Informatics Managing Editor Rajiv Leventhal back in April, the CVS-Aetna deal came almost a full year after a federal judge blocked a merger that would have resulted in Aetna acquiring the Louisville, Ky.-based Humana, which at the time was the largest acquisition of its type in the history of health insurance in the U.S., reported at $37 billion.
“The transaction would violate antitrust laws by reducing competition among insurers,” U.S. District Judge John D. Bates in Washington said at the time, according to Leventhal’s article. In the past two years, the U.S. Department of Justice challenged and stopped two health insurance mega-mergers, the Aeta-Humana deal and a proposed $54-billion merger between Anthem, Inc. and Cigna.
There has been speculation that antitrust regulators would not approve the CVS-Aetna deal, just like other recent major mergers in this space. However, PBM-retail-insurer mergers do not involve two health insurance companies like the other deals that were shot down. Cigna and Express Scripts shareholders voted to approve the firms’ merger last month, despite opposition from activist investor Carl Icahn, according to CNBC.
In the statement, Cigna and Express Scripts said the DOJ has cleared the pending merger, “terminating the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.” Cigna and Express Scripts said the deal will close by year-end 2018.
“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,” David Cordani, president and chief executive officer of Cigna, said in a statement. “The value that we deliver together will help put our society on a far more sustainable path – one that helps health care professionals close gaps in care and supports our customers along their health journey.”
“Together, we believe we will be able to do even more to reduce healthcare costs, expand choice, and improve patient outcomes,” Tim Wentworth, president and chief executive officer of Express Scripts, said in a statement. “Today’s decision is one more important milestone in our effort to combine two innovative health services leaders into a company that will transform health care.”
The expiration of the Hart-Scott-Rodino waiting period satisfies one of the conditions necessary to the consummation of the transaction. Completion of the transaction remains subject to certain state regulatory approvals and filings required in connection with the transaction, including clearances from certain departments of insurance, and the satisfaction of all closing conditions, the companies said.
To date, Cigna and Express Scripts have obtained clearances from departments of insurance in 16 states. The companies are working constructively with regulators in the remaining jurisdictions to obtain clearance for the merger.