A merger between Cigna and Express Scripts would make data-sharing between payers and providers easier and would improve drug price transparency, Gurpreet Singh, partner and U.S. health services leader for consulting firm PwC, tells FierceHealthcare.
It could also decrease competition and put even greater pricing pressure on pharmaceutical companies.
Cigna announced Thursday morning that it would buy Express Scripts, the largest pharmacy benefit management firm in the U.S., for $67 billion. The deal echoes a similar planned vertical merger between CVS and Aetna. That deal, valued at $69 billion, would also bring together one of the nation's largest payers with a major PBM.
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A growing M&A trend
Singh said healthcare consolidation trends are moving toward vertical integration between two entities at different points on the supply chain and away from the more traditional horizontal integration, where one firm snaps up a direct competitor.
"The trend that we're seeing is [healthcare entities] moving from just acquiring to get bigger—provider with another provider, payer with another payer—to mergers [and] partnerships ... that are creating value across the integrated value chain," Singh said.
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These deals are "cutting down the barriers" between different points in the chain, he said, opening up avenues between payers and PBMs, for example, or between those firms and other patient access points.
But there's a potential drawback: Vertical mergers in the mold of the Cigna-Express Scripts deal could change the dynamic between PBMs and their unaffiliated payer clients. For its part, CVS has said its deal with Aetna would not change its contracts with other payers. But Singh said it's not out of the realm of possibility for these types of deals in general.
Pharma is watching
The trend extends to pharmaceutical companies, which are actively seeking partnerships with data providers and other firms that can "optimize" the value chain, Singh said.
Pharmaceutical companies will be watching this kind of consolidation closely, as increased price transparency could translate to greater pricing pressure, Singh said. But pharma companies are protected in part because their business models don't begin and end with medications.
"Many pharmaceutical companies go beyond the commodity of a drug, but instead offer more of a service around that, to be responsive to price pressures," he said.
A mixed bag for patients
The merger would be good for consumers in a number of ways—from increased price transparency to improved care quality. But less competition also poses a substantial risk. Consumer advocates warn that having fewer players in the market rarely pays off for patients.
"Clearly, there is a bit of a double-edged sword," Singh said.
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At a congressional hearing on the CVS-Aetna deal, consumer advocates noted that vertical mergers are less likely to pose anticompetitive concerns, but added that because of the lack of transparency in the PBM space, there's risk for abuse.
Singh said deals like the one between Cigna and Express Scripts "in some ways opens up that black box" and increases price transparency. The ability to share data could also improve care quality with better medication adherence monitoring and improved care management, he said.