Cigna officially absorbed one of the largest pharmacy benefit managers in the country on Thursday, closing its $67 billion purchase of Express Scripts.
The acquisition gives Cigna significant leverage in a market in which insurers are increasingly partnering, acquiring or being bought by PBMs. With Express Scripts under its wing, Cigna joins CVS, UnitedHealth and Humana and Anthem as the primary vertically integrated powerhouses in the insurance industry.
Combined, Cigna and Express Scripts brought in more than $141 billion in revenues in 2017. In a statement, Cigna said the merger will "dramatically accelerate the number and breadth of value-based relationships."
“Today’s closing represents a major milestone in Cigna’s drive to transform our healthcare system for our customers, clients, partners and communities," Cigna President and CEO David M. Cordani said in a statement.
"Together, we are establishing a blueprint for personalized, whole person healthcare, further enhancing our ability to put the customer at the center of all we do by creating a flexible, open and connected model that improves affordability, choice and predictability," he added. "By approaching each individual as a whole person – body and mind as one – we are empowering and supporting customers to take control of their total health and well-being."
Cordani added that he is confident the acquisition will create "significant shareholder value."
The company also pledged an incremental investment of $200 million to its charitable foundation and launched a community engagement program called "Healthier Kids for Our Future."
It was mostly smooth sailing for the merger, especially when compared to the other vertical megamerger this year in CVS and Aetna, which is still facing some resistance from a D.C. district judge. The companies weathered a brief hiccup in August prior to their shareholder vote when activist investor Carl Icahn attempted to sideline the deal, calling it “ridiculous,” a “$60 billion folly” and a “huge bailout” for Express Scripts shareholders.
Executives have said the deal will generate $625 million in administrative costs savings over the next three years. But Leerink analysts noted on Wednesday that plenty of questions remain about the cultural and operational challenges of integrating the two massive companies and how the company will compete with the new CVS-Aetna giant and UnitedHealth’s OptumRx.
Although Cigna emphasized its newfound potential to drive value, the two companies haven't always seen eye-to-eye. Earlier this year, executives diverged on value-based drug contracts, with Chief Medical Officer Steve Miller, M.D., saying the current system isn't built for that type of model.
The company will also have to face emerging regulatory threats, as the Trump administration has, at times, singled out pharmacy middlemen as the culprit behind high drug prices. A pending rule could shake up the industry’s rebate structure.
There have also been increasingly persistent calls for PBM transparency, and some, like CVS, have launched new offerings focused on net pricing as opposed to rebates. Some analysts say that could be the future of PBM models.
But the companies argue that the combined entity will drive greater affordability by offering a broader portfolio of services aimed at consumer choice.