By Bruce Japsen
Originally published in Forbes, 8/29/18
Cigna said it is making progress with regulators to win approval of its acquisition of pharmacy benefit manager Express Scripts, confirming regulators in 14 of 29 states have signed off on the merger.
“Currently, Cigna has received approvals from 14 states,” the health insurer said Wednesday afternoon in a regulatory filing with the Securities & Exchange Commission. “Approvals from 15 additional states are conditions to closing the transaction.”
Cigna didn't specify which state approvals are still needed but the health insurer says the deal remains on track.
The news comes following last week’s approval of the merger by shareholders of both companies amid an ongoing review by regulators of the U.S. Justice Department. “Cigna continues to work cooperatively with the DOJ and the states to discuss the many benefits of the Express Scripts transaction and anticipates that the merger will close by year-end 2018,” Cigna said in a statement.
Cigna’s confidence is good news for investors in both companies given recent attacks on the deal by activist billionaire Carl Icahn and calls for more scrutiny from an influential Republican member of Congress who has asked the U.S. Justice Department’s antitrust division to conduct a “rigorous review” of both the Cigna-Express Scripts merger and CVS Health’s proposed purchase of Aetna, the nation’s third largest health insurer. “These transactions would result in substantial vertical integration within the pharmaceutical supply chain, with the three largest pharmacy benefit managers (PBMs) all vertically integrated with insurance companies,” U.S. Senate Judiciary Chairman Charles Grassley, an Iowa Republican, wrote earlier this month to Assistant U.S. Attorney General Makan Delrahim.
Because the Aetna-CVS Health merger is further along, investors are watching closely to see if it is approved, thinking the Cigna-Express Scripts deal would have a better chance given the deals are similar. CVS owns a large PBM known as Caremark in addition to its more than 8,000 drugstores and 1,100 retail health clinics.
CVS executives earlier this month seemed confident that the Aetna deal would be approved though there may have to be some divestitures. “When we announced the transaction last December, we contemplated a range of possibilities in limited (Medicare part D) prescription drug plan area in which both CVS and Aetna offer plans, and we determined the impact of any divestitures would not be material to the deal model,” CVS Health CEO Larry Merlo told analysts earlier this month on the drugstore chain’s second-quarter earnings call.