Cigna Express Scripts Merger APPROVED

The United States Department of Justice (DOJ) has given the necessary approval of Cigna's acquisition of pharmacy benefit manager (PBM) - Express Scripts.  The $52 billion deal will result in a consolidated healthcare behemoth that some say, is in reaction to recent healthcare sector entrant - Amazon.  Another large scale healthcare acquisition/merger - CVS/Caremark and Aetna - is currently under DOJ review, but is expected to be approved soon, in a $69 billion transaction.  The Cigna/Express Scripts transaction is scheduled to be completed by the end of 2018.

Previously (2007) CVS acquired PBM - Caremark - in a $21 billion deal; and in 2015, health insurance giant United Healthcare purchased PBM - CatamaranRx - at the time the 4th largest PBM in existence, and folded it into their OptumRx subsidiary.  Clearly, there's something to the consolidation of health insurers (or payers) and PBM's, which began prior to Amazon's foray into healthcare, and the more recent announcement of the establishment of the yet to be named "Amazon/Berkshire Hathaway/JP Morgan/Chase healthcare coalition".

If you're not familiar with what/who PBM's are, they are third party administrators of prescription drug programs for a variety of health insurance plan types including commercial plans, self-insured, Medicare Part D, state government plans, and the Federal Employees Health Benefits Program (FEHBP).  In effect, the PBM's process the transaction of prescription drug purchases that are initiated by a patient/consumer at a pharmacy (retail and/or mail order), according to the insurer/payors guidelines and protocols.  Importantly, PBM's also negotiate discounts and rebates from drug makers, and facilitate the so called formularies that determine patients drug costs, tiers, access, etc., for those with insurance through the aforementioned payor types.

While there are a number of relatively smaller/nimble PBM's in existence (e.g., Magellan Rx Management, WelldyneRx, CastiaRx), the largest in recent memory have been Caremark, CatamaranRx, OptumRx, and Express Scripts.  With Cigna's purchase of Express Scripts, and the pending approval of CVS/Caremarks' purchase of Aetna, the 4 largest PBM's will be integrated units of large health insurance companies.  It will be interesting to see how the 36 Blue Cross Blue Shield Association plans throughout the country adapt to being the only major health insurer that contracts out it's pharmacy benefit management.  I would also expect to see further acquisition and merger activity among the assortment of existing PBM's.

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