The $67 billion deal between Cigna Corp. and Express Scripts is expected to close on Thursday after snagging approval from regulators in New Jersey—the last state needing to sign off on the merger.
"All required regulatory approvals now have been received and the parties expect to close the transaction on December 20, 2018, subject to the satisfaction of all other closing conditions," Cigna noted in a filing Wednesday with the Securities and Exchange Commission.
Bloomfield, Conn.-based insurer Cigna and St. Louis-based pharmacy benefit manager Express Scripts cleared federal and state regulatory hurdles less than a year after they first announced their plan to merge in March. The companies say they will deliver more choice, lower costs and better coordinated care to customers by integrating medical and pharmacy services under one roof.
The deal is the second massive merger in the health insurance industry to get the go-ahead from the federal and state regulators this year. The $70 billion mash-up between CVS Health and Aetna was the first to close in November, though a federal judge still needs to bless the pair before they can combine operations.
The U.S. Justice Department signed off on the Cigna-Express Scripts deal in September after concluding it was unlikely to harm consumers or competition in the PBM market. Federal regulators didn't require any divestitures for their approval. California and New York regulators OK'd the deal last week with conditions.
Cigna CEO David Cordani, who will lead the combined company, has promised that most of the medical and pharmacy cost savings will flow to customers instead of shareholders. Express Scripts CEO Tim Wentworth is slated to become president of the PBM unit within Cigna.
Some PBM industry insiders are skeptical that the deal will drive much savings for customers. The PBM business is notoriously secretive, and switching ownership of the PBM is unlikely to change that, critics of the merger have said. Moreover, a competitive insurance market is needed if any savings are to translate into lower premiums for customers, but the insurance industry has been consolidating at a rapid pace.
On the other hand, the sheer bulk of the combined Cigna-Express Scripts may allow it to negotiate better prices from drugmakers. The companies have a combined revenue of $141.7 billion, based on 2017 financial results.
Integrating medical and pharmacy benefits allows the company to think holistically about a patient's health, which should in theory allow it to lower costs. For example, a company that controls medical and pharmacy costs may choose to provide access to a certain expensive drug if it means lower medical costs down the road. But a company controlling just the pharmacy benefit has less incentive to provide that expensive drug.
Cigna previously attempted to merge with another health insurer, Anthem, but a federal judge blocked that deal in February 2017. The two companies are still embroiled in litigation surrounding a $1.85 billion break-up fee. Express Scripts is also involved in a legal spat with Anthem, which sued the PBM for $15 billion after alleging it overcharged Anthem by $3 billion annually.