Justice Department Clears Cigna's Acquisition of Express Scripts

Office workstation top view of business people working around M&A keyboard calculator phablet and money on wooden table- merger and acquisition concept

On September 5, The Wall Street Journal reported the DOJ was close to approving the Cigna-Express Scripts deal as well as CVS Health's $US69 billion merger with the insurer Aetna, though that deal might require the divestiture of certain businesses related to Medicare drug coverage before it can go through.

The companies say completion of the transaction is still 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 Justice Department's six-month review found that the merger is "unlikely to result in harm to competition or consumers" due to Cigna's small nationwide PBM business and the preponderance of other PBMs in the market.

"If Cigna is allowed to become the latest in the trend to take PBM needs in-house, it is more likely that consumers could end up at the mercy of a handful of giants - each with its own siloed services - and the choices they now enjoy for medical care and pharmacy needs becoming a thing of the past", Consumers Union senior policy counsel told USA lawmakers earlier this year. Express Scripts shares surged 4% in Monday afternoon trade, and Cigna shares rose almost 2%, compared with a 0.5% slump in the S&P 500 and a 0.3% decline in the Dow Jones Industrial Average.

Insurers, pharmacy-benefits managers and others in the health care supply chain have been making deals to streamline expenses and gain scale in an industry threatened by rising costs for medical services and new competition from the technology sector.

The deal is expected to close by the end of the year. CVS also manages drug-benefits plans for employers and insurers, a business that could help steer Aetna's customers into CVS drugstores when they fill prescriptions.


Cigna is a health insurance provider. The agency also said competition from other vertically-integrated companies and PBMs and the prospect of losing customers makes it unlikely that Cigna and Express Scripts would hike prices for their rivals after merging.

Yesterday's approval "bodes well for the pending US antitrust review of CVS Health Corp's proposed $69 billion acquisition of health insurer Aetna Inc.", writes Reuter's Caroline Humer. Cigna and Express Scripts said the deal will close by year-end 2018.

The Justice Department's approval of the Cigna-Express Scripts deal did not come as a shock.

In the news announcement Monday, Express Scripts CEO Tim Wentworth reiterated that combination of the companies would "be able to do even more to reduce healthcare costs, expand choice, and improve patient outcomes" and "transform healthcare".

On its first quarter earnings call with investors earlier this year, Cigna executives said they expect the deal to result in earnings per share increasing from $18 to $20-21 by 2021 and a long-term annual growth rate of 6% to 8%.

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