The Department of Justice (DOJ) approved Cigna’s acquisition of Express Scripts on Monday, saying the move was “unlikely to result in harm to competition or consumers.”
While some economists, legal experts, and business leaders agree—there are plenty of concerns in the marketplace about what this could mean.
A survey conducted by the National Business Group on Health (NBGH) found only 26% of large employers believe mergers between health plans and pharmacy benefit managers (PBMs) “will have a positive impact on cost, quality and consumer experience.
Brian Marcotte, NBGH’s president and CEO, said the merger “should drive better care for patients and lower costs for employer plans,” though its impact on medical and pharmacy integration will depend on “Cigna’s ability to execute.”
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Thomas Greaney, J.D., a professor of health law and federal securities at the University of California, Hastings, warned the merger could trigger other market effects that have detrimental effects for consumers,
If DOJ approves CVS’s acquisition of Aetna, more than 70% of the PBM market could be combined with three of the largest health insurers (including UnitedHealthcare and Optum), he noted. Smaller insurers that operate “without an effective and well-functioning PBM provider partner…could be at a disadvantage.”
This could prove problematic at a time when many insurers, including small ones, have been expanding their reach across the board, including in the slowly-stabilizing individual market.
To curb these unwanted effects, state insurance commissioners or attorneys general could put consent decrees on the merger, Greaney explained. Alternatively, state or federal agencies could issue vertical merger guidelines.
Bill Baxter, associate attorney general under president Ronald Reagan, issued guidelines for horizontal mergers that had an “enormous effect,” functioning “almost as if they’re law,” Greaney noted.
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That said, there is a contingent that believes the deal will be good for consumers. Among them: Ben Isgur, who leads PricewaterhouseCooper's Health Research Institute. He told FierceHealthcare this deal is “the true definition of disruption.”
With Express Scripts under its wing, Cigna will control more of the supply chain and have more negotiating power, Isgur said. Ideally, this will generate savings that translate into lower prescription drug costs for consumers.
William Sage, M.D., J.D., who teaches at the University of Texas, Austin's School of Law and Dell Medical School, agreed, saying "the health insurance industry could use a major re-think of its business model."
"The current “pharmaceutical supply chain” is less a chain than a circle, where employers and beneficiaries inject cash while the participants find clever ways to pass it around," Sage said.
"Anything that reduces contractual complexity and the potential for hidden self-dealing...strikes me as a good thing," he concluded.