A deal reportedly brewing between health insurance giants Cigna and Humana will likely face antitrust challenges over their respective pharmacy benefit management businesses, experts tell Axios.
Details: The combination would be huge. Cigna is now valued at $78 billion and Humana is at roughly $60 billion.
With 35 million members between them, the combined company would have the scale to rival UnitedHealth Group and CVS Health.
What they're saying: The companies' respective insurance businesses may not trigger antitrust concerns, since Cigna is more focused on the private market while Humana is centered on government business, including Medicare Advantage.
Cigna is reportedly exploring a sale of its Medicare Advantage business, which investors see as preparation for a possible Humana bid, wrote TD Cowen analyst Gary Taylor.
"We actually think antitrust concerns could be alleviated in the medical insurance part of this deal since there would be very little overlap that couldn't be solved by divestitures," Julie Utterback, a senior equity analyst for Morningstar, wrote in an email to Axios.
Yes, but: That "leaves an elephant in the room," Taylor wrote — PBMs.
"Given the extraordinary regulatory scrutiny of PBMs, this aspect of the deal seems certain to be challenged," he said.
Utterback said it was hard to imagine Cigna giving up Express Scripts, the country's second-largest PBM, which it acquired for $54 billion in 2018. At the same time, it would be hard for Humana to divest of its PBM, which largely serves its own customers.
"It gets trickier on the PBM side of things where we are unsure of how a deal could be structured to satisfy regulators," Utterback wrote.
Flashback: Humana and Cigna flirted with the idea of merging in 2017 after regulators struck down their deals to combine with Aetna and Anthem, respectively.
Yes, but: Insurance behemoth UnitedHealth Group, the largest in the U.S with more than 47 million enrollees, would still eclipse a combined company.