Cigna deal gets antitrust nod, positive sign for CVS-Aetna

  • Cigna deal gets antitrust nod, positive sign for CVS-Aetna

Cigna deal gets antitrust nod, positive sign for CVS-Aetna

The U.S. Department of Justice has cleared health insurer Cigna Corp.'s $54 billion plan to buy the pharmacy-benefit manager Express Scripts Holding Co.

"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.

"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. 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.

Express Scripts' stock price rose nearly 4% and Cigna's rose 1.4% in the wake of the Justice Department's approval.

In combining Cigna, a health insurer, and Express Scripts, a pharmacy benefit manager, the firms say they can improve care for patients and lower health-care costs.

The deal, which has already secured shareholder approval, is expected to close at the end of the year.

Over the next decade, retail prescription drugs will be the fastest growing health category and will consistently outpace that of other health spending - due to higher drug prices and more use of specialty drugs. PBMs act as intermediaries between drug manufacturers and health insurance plans and their beneficiaries.

Brian Tanquilut, an analyst with Jefferies, said DOJ's decision not to intervene is not surprising "given the lack of overlap between Cigna's business versus Express Scripts". That combination would unite the US drugstore giant with the third-biggest health insurer.

"We are pleased that the Department of Justice has cleared our transaction and that we are another step closer to completing our merger", Cigna Chief Executive David Cordani 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", he adds. Visit MarketWatch.com for more information on this news. CVS and Aetna shares also rose, closing up 1.5 percent and 1 percent, respectively. Federal antitrust enforcers have not successfully blocked a vertical merger in decades, and a federal judge in June cleared the vertical deal between Time Warner and AT&T after the Justice Department challenged it, which boded well for Cigna and Express Scripts' chances.