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Cigna-Express Scripts Deal to Face Justice Department Review

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Cigna Corp. confirmed that its proposed $54 billion acquisition of Express Scripts Holding Co. will be reviewed by the U.S. Department of Justice, which has raised the bar for approving deals that don’t combine direct competitors.

The health insurer has been telling investors since at least early April about the review, but hadn’t made a public statement until late Wednesday. Analysts at Credit Suisse sent an alert to clients on April 5, saying Cigna Chief Executive Officer David Cordani told investors during an event in Europe that the deal would be looked at by the Justice Department.

(Related: Cigna to Buy Express Scripts as Health Shakeout Speeds Up)

Cigna agreed in March to acquire Express Scripts, a pharmacy-benefits manager, wagering that the combination can reduce costs and improve benefits for Americans by simplifying the health care supply chain. CVS Health Corp. separately struck a $68 billion deal for Aetna Inc., a transaction that’s also facing Justice Department review.

Both deals are so-called vertical transactions that combine companies operating in different parts of the same industry: health insurance and pharmacy benefit management. For years, such mergers have been approved by antitrust enforcers with conditions on how the firms conduct business in order to remedy any harm to competition from the tie-ups.

But the Justice Department’s antitrust chief, Makan Delrahim, has taken a tough stand against those kind of settlements, arguing they force antitrust officials to become regulators who need to monitor the effectiveness of the agreements. That position led to his lawsuit last year against AT&T Inc.’s proposed acquisition of Time Warner Inc.

Cigna said in a statement that it is “optimistic in our ability to obtain regulatory approval.”

The Justice Department declined to comment, so did a spokesman for Express Scripts.

The Justice Department successfully blocked two previous health-insurance deals, suing to prevent Aetna from buying Humana Inc. and to keep Anthem Inc. from acquiring Cigna.

—With assistance from Robert Langreth.

— Read Aetna CEO Bertolini Could Get $88 Million Parachute in CVS Deal on ThinkAdvisor.

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