The companies' proposed merger could be closely scrutinized. Cigna is looking to increase purchasing power, particularly with specialty drugs.
Cigna's plan to merge with pharmacy benefit manager Express Scripts is in line with previous consolidations intended to leverage related books of business, but it comes at a time when the nature of PBMs are being questioned.
That could make it difficult for the two companies to get regulatory approval. Antitrust concerns about the combined power of the health plan and the PBM also could get in the way.
Cigna recently announced the plan—a $52 billion deal that would follow other consolidations and disruptions in the healthcare sector, notably Amazon's announcement in January that it was teaming up with Berkshire Hathaway and JPMorgan Chase to create an innovative health plan.
Cigna probably hopes to achieve multiple objectives with the Express Scripts merger, says Brian Duffant, vice president at BluePath Solutions, a market access and health economics consulting firm.
The health plan most likely is looking to improve purchasing power, which will be enhanced by both the increase in lives under management as well as exposure to differing biopharmaceutical manufacturer rebates across the Express Scripts and Cigna books of business, he says.
Higher rebates on similar products in one book of business versus another can serve as leverage for the plan to negotiate higher rebate levels across a broader book of business, Duffant explains.
"Additional synergies may include combined purchasing power in the specialty drug segment, which is the fastest growing component of drug trend," he says. "The combined distribution and purchasing power of the Accredo and CuraScript specialty lines of Express Script, and Cigna Specialty Pharmacy may allow for the new entity to more effectively manage the specialty drug cost trend."
Express Scripts is the largest of the remaining independent PBMs, notes Christopher J. Kutner, JD, partner in the Rivkin Radler law firm, who previously worked as general counsel for a health plan and dealt directly with PBMs. Folding the PBM into the health plan could address some concern about misaligned incentives, he says.
"They were trying to make a profit, and we as a health plan were trying to make a profit. Having them both work in the industry and with their concerns not entirely aligned, that adds cost to the system," Kutner says. "[The Cigna-Express Scripts merger] makes perfect sense because by bringing the PBM into the confines of the payer, [Cigna] will have access to all of the data of their members' prescription drug history. The drug cost is roughly 25% of the expense for health plans, so bringing the PBM in will help Cigna eliminate a layer of cost."
Gregory A. Freeman is a contributing writer for HealthLeaders.