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Justice Department Clears Cigna-Express Scripts Deal

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Antitrust enforcers signed off on Cigna Corp.’s $54 billion takeover of pharmacy-benefit manager Express Scripts Holding Co., clearing one of two health care deals that stand to reshape the industry.

Approval by the Justice Department smooths the way for the deal to wrap up by the end of the year, the companies said Monday in a joint statement. While some state regulators have yet to sign off, the U.S. review was one of the last major steps for the agreement the companies struck in March.

(Related: Cigna Sells $20 Billion in This Year’s Second-Biggest Bond Sale)

Express Scripts shares rose 3.7% to $95.23 at the close in New York. Cigna was up 1.4% to $197.84.

Insurers, pharmacy-benefit managers and others in the health care supply chain have been making deals to streamline expenses and gain scale in an industry threatened by rising costs for medical services and new competition from the technology sector.

The Justice Department said it cleared the deal following a six-month investigation. The deal won’t significantly reduce competition in the market for the services provided by pharmacy-benefits managers or raise costs for Cigna’s rivals, the department said in a statement.

Cigna’s deal for Express Scripts came on the heels of CVS Health Corp.’s about $68 billion deal to buy insurer Aetna Inc., which is still under review. That combination would unite the U.S. drugstore giant with the third-biggest health insurer. CVS also manages drug-benefits plans for employers and insurers, a business that could help steer Aetna’s customers into CVS drugstores when they fill a prescription.

While a combined Cigna-Express Scripts would have substantial bargaining power over drug prices, it remains to be seen whether that muscle would reduce costs for the employers and patients who ultimately pay the bill.

Ana Gupte, an analyst at Leerink Partners, said approval of the Express Scripts deal is a positive sign for CVS and Aetna. That’s because it indicates that the Justice Department likely isn’t concerned about consolidation among insurers and pharmacy-benefit managers, which aren’t direct competitors.

Bloomberg reported earlier this month that CVS and Aetna are in talks with the Justice Department about divesting Medicare prescription-drug plans to resolve the government’s concerns the deal would harm competition.

The Justice Department didn’t put any conditions on the Cigna-Express Scripts deal, the companies said in a joint statement.

“We are pleased that the Department of Justice has cleared our transaction and that we are another step closer to completing our merger and delivering greater affordability, choice and predictability to our customers and clients as a combined company,” Cigna’s Chief Executive Officer David Cordani said in a statement.

— Read Icahn Drops Fight to Block Cigna’s Express Scripts Dealon ThinkAdvisor.

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