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Financial Times / Biz - Money

Cigna unveils $67bn deal to buy Express Scripts

Cigna, the health insurer, added to the deals frenzy gripping the US healthcare industry by announcing plans to acquire Express Scripts, a large pharmacy benefits manager, for $67bn including debt. 

Mergers and acquisitions activity in the healthcare sector is running at a record pace this year, with $127bn of deals agreed so far, according to Dealogic, the data provider. The fevered activity has helped push overall dealmaking to its fastest pace since the dotcom boom in 2000. 

In December, pharmacy group CVS agreed the $69bn takeover of health insurer Aetna, while Walgreens Boots Alliance, the drugstore group, has held talks with AmerisourceBergen, a leading distributor of medicines. 

Analysts and investors say the rapid consolidation is a response to the threat posed by Amazon entering the healthcare industry in an attempt to lower the soaring cost of drugs and medical procedures in the US. 

US healthcare spending is forecast to hit $5.7tn in 2026, up from $3.4tn in 2016, and companies such as Amazon — which fund healthcare plans for their employees — are worried the exploding costs will eat into profits.

The Cigna deal comes weeks after Amazon said it was forming a joint venture with JPMorgan Chase and Berkshire Hathaway with the task of lowering costs for the trio’s almost 1m employees and “potentially all Americans”.

The transaction would combine the fifth-largest health insurer with a pharmacy benefits manager, or PBM, which acts as a middleman handling negotiations between drugmakers and the insurance companies and employers that buy medicines. PBMs are relatively unknown outside of the private market-based US healthcare system.

David Cordani, Cigna chief executive, said the acquisition — the largest deal agreed so far this year — would create a company that was “well-positioned to drive greater quality and affordability for customers”.

News of the deal sent Express Scripts shares rallying 10 per cent in early trading in New York. Cigna’s stock fell 10 per cent.

The PBM business model involves amassing large numbers of patients from several “payers” and using that heft to demand rebates from drugmakers, who are often willing to offer large discounts to ensure their products are included on the list of medicines for which PBMs will pay. 

The largest PBMs — Caremark, Express Scripts and Optum — together negotiate on behalf of roughly 250m people or “covered lives”. 


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Express Scripts was the last remaining large independent PBM after CVS bought Caremark in 2006. Optum is a unit of UnitedHealth, the country’s biggest health insurer.

Express Scripts’ business model has come under attack from politicians and rival companies in recent months, amid claims it is incentivised to do deals with drugmakers that boost its own profits while pushing up costs for patients and clients — a charge it has vehemently denied. 

Cigna said it would pay $48.75 in cash and 0.2434 of its own shares for each Express Scripts share, giving the target company an equity value of roughly $54bn. The takeout value represents a premium of roughly 31 per cent over the target company’s undisturbed stock price. 

Cigna will also take on Express Scripts’ $13bn of net debt. 

Once the transaction is complete, Cigna shareholders will own about 64 per cent of the company while Express Scripts investors will hold the remaining 36 per cent.