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Analysis

Cigna, Express Scripts $71B Merger Gets OK from California, New York

By John Commins  
   December 14, 2018

The two states approve the deal after receiving assurances that consumers will not foot the bill for the acquisition costs. The feds approved the deal in September.

The $71 billion megamerger of Express Scripts and Cigna Corp. cleared big hurdles this week with state regulators in New York and California approving the deal.

California Department of Managed Health Care Director Shelley Rouillard said the deal cleared "a high standard of review to ensure consumers' healthcare rights are upheld and access to appropriate health care services continues."

"The conditions imposed on Cigna and Express Scripts will improve plan performance, increase access to health care services and assist in controlling health care costs," she said.

The DMHC's approval requires that Cigna and Express Scripts not increase premiums to cover acquisition costs, and keep premium rate increases to a minimum. In addition, the two companies have agreed to invest $60 million in California's healthcare delivery system.

New York's Department of Financial Services held a hearing on the proposed merger on Nov. 21, but waived a second hearing scheduled for Jan. 10, 2019 after receiving only one written comment, one request to testify and "substantial commitments" from Express Scripts and Cigna to address concerns about cost increases for consumers. DFS said the deal was subject to ongoing regulatory oversight.   

The deal, which received approval from the federal government in September, is expected to close by the end of the year, now that New York regulators have cancelled the January hearing. However, New Jersey regulators have yet to approve it.

The Cigna/Express Scripts merger is the second major vertical integration of a pharmacy benefits management company and health insurance company to be approved by state and federal regulators this fall.

In November, CVS Health and Aetna Inc. announced the completion of their approximately $70 billion merger, days after New York state regulators signed off on a deal. Since then, however, a federal judge reminded CVS and Aetna that the deal still must get his approval.

Observers believe these mergers have the potential to fundamentally change healthcare delivery by more effectively addressing consumer concerns about rising healthcare costs and price transparency.

New York regulators placed the overall value of the Cigna/Express Scripts deal at $71 billion.

Cigna will pay $58 billion to acquire Express Scripts. This includes $27.5 billion in cash—$24.5 billion in new debt comprised of approximately $20 billion in senior notes, $1.5 billion in commercial paper, $3 billion per term loan credit agreement, and $3 billion cash on hand.

The remaining $30.5 billion in new equity will be issued to Express Scripts' shareholders. Cigna will also assume $13 billion of Express Scripts' debt, with the total value of the merger being approximately $71 billion.

“The conditions imposed on Cigna and Express Scripts will improve plan performance, increase access to health care services and assist in controlling health care costs.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

Photo credit: Piotr Swat / Shutterstock.com


KEY TAKEAWAYS

Cigna/Express Scripts merger is the second vertical integration of a pharmacy benefits management company and a health insurance company to be approved by regulators this fall.

New York regulators place the overall value of the deal at $71 billion, which includes Cigna shouldering $13 billion of Express Scripts' debt.

The deal still awaits approval from New Jersey, but is expected to be finalized by the end of the year.


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