Shareholders of the nation’s largest pharmacy benefit manager and its third-largest health insurer voted Friday to give the final go-ahead to a $54 billion deal to combine the two companies.
On Friday morning, shareholders of Cigna and Express Scripts voted to approve Cigna’s acquisition of the PBM, which the companies had announced in March. The deal – which will still need approval from antitrust regulators – is only the latest in a trend toward industry consolidation that has already seen combinations between PBMs and insurers. In March, shareholders of CVS Health and health insurer Aetna approved the latter’s $69 billion acquisition by the former, though that deal is awaiting regulatory approval. CVS Health already runs the nation’s second-largest PBM, CVS Caremark, and its second-largest drugstore chain.
Investor Carl Icahn had sought to derail the Cigna-Express Scripts deal, but backed off earlier this month.
However, the PBM-payer mega-mergers are happening at a time when PBMs and their business models are under increasing scrutiny from the government and others. Indeed, in an Aug. 1 letter, California insurance commissioner Dave Jones urged the Department of Justice to block the CVS-Aetna deal on the grounds that the deal would be anti-competitive, at a time of significant concentration within the market for PBM services. The American Medical Association has opposed the deal as well.
“In addition to removing Aetna as an important potential competitor from the PBM marketplace, the enhanced market power of a merged CVS and Aetna will have an anticompetitive effect on both California’s PBM and health insurance markets, as well as an anticompetitive impact on the retail pharmacy market,” Jones wrote.
Nevertheless, according to media reports, antitrust regulators are unlikely to block the deal.
On Monday, it was reported that Department of Health and Human Services Secretary Alex Azar said the government could put an end to the secretive rebates that PBMs extract from pharmaceutical companies in exchange for including their drugs on formularies. While the PBM industry contends that rebates save payers and thus patients money in the form of lower premiums and out-of-pocket costs, a research report released in April by nonprofit health systems research and consulting organization Altarum called PBMs’ large size a “double-edged sword.” Although PBMs’ size allows them to extract greater rebates from manufacturers, the report explained, it also likely results in their withholding more of the resulting savings.
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