Cigna and Express Scripts Seal $54 Billion Merger
20 Dezembro 2018 - 4:16PM
Dow Jones News
By Anna Wilde Mathews
Cigna Corp. completed its $54 billion acquisition of Express
Scripts Holding Co., setting up a battle among giant health
companies to try to cut health-care costs by managing both medical
and drug benefits.
The Cigna deal, which won an antitrust nod from the Justice
Department without requiring divestitures, brings together a health
insurer with a strong focus on employers with a major
pharmacy-benefit manager.
In an interview, Cigna Chief Executive David Cordani said an
initial focus of the combined company will be on ensuring continued
smooth business-as-usual operations, but it will begin rolling out
new initiatives next year that seek to take advantage of the tie-up
between medical and pharmacy oversight, including efforts focused
on specialty pharmaceuticals and mental health.
"It's all with the intense focus on making sure the service
promise and the support promise...remain rock solid," he said,
adding that going forward, "we as a company will have more tools
and capabilities to drive accelerated transformation."
The announcement follows the closing last month of CVS Health
Corp.'s takeover of Aetna Inc., which melds an insurer, a PBM and
retail drugstores. Both will face off against UnitedHealth Group
Inc., the parent of the biggest U.S. health insurer, a PBM and an
array of doctor groups and clinics. Another big insurer, Anthem
Inc., is rebuilding its own PBM, which will launch in 2020.
"They're all going after the combined pharmacy and medical
offering as the value proposition," said Ana Gupte, an analyst with
Leerink Partners LLC. "That's the big story. The question is, what
will they be able to do, and what can they offer to employers?"
With the deal, Cigna also takes on greater scale and heft, she
said, to help it compete against behemoths like UnitedHealth and
CVS.
Cigna has said that its takeover of Express Scripts will help it
squeeze out costs for clients as well as create smoothly integrated
products aimed at improving customers' experience. Among other
goals, it hopes to hold clients' health-cost growth to the rate of
general inflation.
Mr. Cordani said in the interview that Cigna's combination of
assets -- which doesn't include bricks-and-mortar drugstores or an
extensive network of owned clinics and surgery centers -- give it
flexibility to offer clients and other partners options. "We think
a choice and open-architected model is more beneficial," he
said.
In the short term, investors will be watching for Cigna's early
financial projections, analysts said. The insurer has promised more
than $600 million in administrative savings tied to its Express
Scripts takeover, and projected that it will have earnings per
share of $20 to $21 in 2021. Cigna has laid out the earnings goal,
but "that doesn't tell us what exactly the path is to get there,"
said Matthew Borsch, an analyst with BMO Capital Markets.
Mr. Cordani didn't confirm a date for when Cigna will offer 2019
financial guidance, but said the company has in the past done so
during its fourth-quarter earnings call.
The takeover happens as the traditional PBM business model is
under scrutiny, from state health officials and some employers,
which have complained about a lack of transparency on pricing.
A survey earlier this year by the National Business Group on
Health found that only 26% of employers were optimistic about
mergers between PBMs and insurers, while 56% were skeptical they
would lead to improvements and 18% actually felt they would raise
costs.
Cigna has previously highlighted one example of where it might
be going. In October, Express Scripts unveiled a new deal with an
employer coalition that involved passing through all rebates and
other payments from drug companies to employers. Express Scripts
could get extra payment -- or potentially have to give back some
money -- based on whether it hits goals for patient outcomes and
financial savings. Mr. Cordani, during an analyst call in November,
said the arrangement was "indicative of what we'll be doing more
together" once the insurer and PBM are under the same roof.
In the interview, Mr. Cordani said the new combined company is
focused on transparency and alignment with customers and other
partners.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
December 20, 2018 13:01 ET (18:01 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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