Cigna Agrees to Buy Express Scripts for More Than $50 Billion

Deal Expands Portfolio of Health Services

Health insurer Cigna Corp. plans to buy Express Scripts Holding Co. in a cash-and-stock deal worth $52 billion, excluding debt, that the companies say will expand their health care offerings and help them control costs. St. Louis-based Express Scripts is a pharmacy-benefit manager. Such companies serve as middlemen that help negotiate discounts with drugmakers.

Under the terms of the agreement, Express Scripts shareholders will receive $48.75 in cash and 0.2434 shares in the combined company for each Express Scripts share. The consideration amounts to about $96.03 for each Express Scripts share, a 31% premium over Express Scripts’ Wednesday closing price of $73.42. The deal has a total transaction value of $67 billion, which includes Cigna’s assumption of $15 billion of Express Scripts’ debt. Express Scripts share rose 16% premarket Thursday, while Cigna shares are inactive.

Late last year, CVS Health Corp. signed a nearly $70 billion deal to buy Aetna Inc. In 2015, Aetna agreed to buy fellow health insurer Humana Inc. in a $37 billion deal that was later terminated following regulatory scrutiny. That same year, Cigna agreed to combine with Anthem Inc., a deal that was also blocked by regulators.

Late last year, Anthem said it would launch its own PBM, dealing a blow to Express Scripts, which is a partner of the health insurer. Anthem has been Express Scripts’ biggest customer, representing some $17 billion in annual revenue for the company. Last year, Anthem said that it doesn’t intend to renew its 10-year contract with Express Scripts when it expires at the end of 2019.

The Affordable Care Act and other factors roiling the health-care industry prompted the health insurers to attempt a major consolidation wave in 2015.

After they were thwarted, a new round of deal making is under way that stretches beyond just insurance. Besides this deal and CVS-Aetna, Walgreens Boots Alliance Inc., the other top pharmacy chain alongside CVS, had been pursuing a full takeover of AmerisourceBergen Corp., a big drug distributor in which it already owns a stake, The Wall Street Journal has reported, though those talks appear to have cooled.

Meanwhile, grocer Albertsons Cos. recently agreed to buy what is left of Rite Aid Corp., a smaller competitor of CVS and Walgreens, after a big chunk of the drugstore chain was sold to Walgreens.

What it all adds up to is a furious round of consolidation as health-care companies of all stripes seek to position themselves to provide more cost-effective care and fend off heightened competition from Inc. and others.

Express Scripts is the biggest administrator of prescription-drug benefits in the U.S. It has marquee clients that include the Department of Defense and Walmart Inc.

The company had for years prided itself on its independence, even as its pharmacy-benefits competitors were gobbled up by other players in the health-care industry, including insurer UnitedHealth Group Inc. and CVS Health, a retail-pharmacy giant that is now expanding into health insurance.

Last year, Express Scripts agreed to buy private medical-benefits manager eviCore healthcare for $3.6 billion. Industry watchers viewed the deal as a way for Express Scripts to replace revenue following the expected loss of Anthem.

Bloomfield, Conn.-based Cigna is known for its focus on administering coverage for large employers, as well as a burgeoning overseas presence. With its 2012 acquisition of HealthSpring, Cigna also bolstered its Medicare business.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

Best regards,
Kirk Reinitz, CPA