Cigna agrees to buy Express Scripts

Cigna to buy Express Scripts in $67 billion deal
Cigna Seeks to Buy Drug Plan Firm for $67 Billion
Author

16 March, 2018

The price includes $48.75 in cash and 0.2434 shares of stock of the combined company per Express Scripts share, the companies said in a statement Thursday.

Pharmacy benefits manager Express Scripts, a middleman between insurers and drug makers, was worth $41.43-billion (29.81 billion pounds) as of Wednesday's close, while No. 5 USA health insurer Cigna had a market cap of $47.18-billion, according to Thomson Reuters Eikon data.

Executives for CVS and Aetna made similar claims when that deal was announced previous year. Mngmt has invested 0.06% in Express Scripts Holding Company (NASDAQ:ESRX).

The Cigna-Express Scripts deal is also Cigna's first merger attempt since the federal government a year ago successfully blocked its proposed deal with rival insurer Anthem. Shares repurchase plans are generally a sign that the company's board believes its shares are undervalued.

The companies didn't provide many details about how the insurer would differ from other health care insurers.

The combined company will be led by Cigna's president and CEO David M Cordani as president and CEO. The deal is created to give Cigna a competitive advantage-or at least a fighting chance-amid a series of big moves in the PBM market by heavy-hitters looking to rein in rising costs as the healthcare industry's landscape keeps shifting. The PBM segment offers clinical solutions, specialized pharmacy care, home delivery and specialty pharmacy, retail network pharmacy administration, benefit design consultation, drug utilization review, drug formulary management, administration of a group purchasing organization, and consumer health and drug information services. Last month, president Donald Trump's Council of Economic Advisers criticized (pdf) these companies for undo market power and a lack of transparency. 39,907,624 shares of the company were exchanged, compared to its average volume of 4,550,000.

"Now neither of those entities are now available for Amazon", said Gupte, an analyst with more than 20 years of health care and strategy consulting experience. However, Cigna was enmeshed in the ANTM merger and we assume it did not exercise its change of control provision.

Edgepoint Investment Group Inc. holds 2.41% of its portfolio in Carpenter Technology Corporation for 3.35 million shares. Aevitas Wealth Management Inc. bought a new stake in shares of Express Scripts during the 4th quarter worth about $128,000.

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In recent years, the model of a pharmacy benefit manager has come under scrutiny as members of the public and politicians - prodded by the pharmaceutical industry, which has been trying to deflect criticism on drug costs - have questioned whether benefit managers are profiting from higher drug prices by keeping a percentage for themselves. "If you think about a world where we want to pay for the effect of the drugs on medical outcomes, that's harder to do with an external PBM". Amazon could still do a deal of its own to realize its ambitions in health care, at a time when everyone else is scrambling to get ahead of them.

The fall out of Cigna acquiring Express Scripts could also be interpreted whether the shareholders have ignored the gains of the acquisitions.

Large commercial payers are planning to effectively transform the industry by vertically integrating provider and pharmacy services with health plan operations, which could increase financial footing and consumer-value.

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

"This significantly raises the risk that both deals are going to be challenged", Balto said.

The Affordable Care Act also is forcing health insurers and others in the industry to consolidate in response to broader federal involvement in health care and uncertainty caused by revisions in the law by Congress.

Gerard Anderson, a professor at Johns Hopkins Bloomberg School of Public Health, worries that large employers will have less choice when they are looking for health benefits.


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