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Roadblocks Imperil CVS-Aetna, Cigna–Express Scripts Deals

By Steven Porter  
   August 02, 2018

California formally urged the DOJ to block one blockbuster PBM deal, and a powerful investor came out against the other.

Two planned mergers involving some of the largest pharmacy benefit managers in the country hit separate snags Wednesday that could derail the potentially industry-shifting proposals.

California Insurance Commissioner Dave Jones formally urged the U.S. Department of Justice to block CVS Health's planned $69 billion purchase of Aetna on anti-competitive grounds, and news broke that activist investor Carl Icahn plans to vote against Cigna's planned $54 billion purchase of Express Scripts.

The two separate developments threw cold water on the closely watched deals, which observers had said could dramatically change the healthcare industry.

California's Concerns

Although the verticality of the CVS-Aetna acquisition prompted some analysts to say the deal would sail through the regulatory review process without much trouble, Jones wrote in a letter Wednesday that the combination of an insurer with a PBM and retail pharmacy chain could still raise anti-competitive concerns.

When a seller owns its own supplier, it may be tempted to make it more difficult for other sellers to work with that supplier, Jones wrote, adding that the problem is especially pronounced in a case involving a market player as powerful as CVS Health.

"Although this merger is predominantly a vertical one, this merger also has horizontal impacts," he wrote, asking the DOJ to sue to block the deal.

Related: Aetna Posts Slight Gains in Q2 Earnings

Related: Express Scripts Financially Sound Ahead of Cigna Merger

Related: Cigna, Like Express Scripts, Posts Strong Pre-Merger Earnings

News reports last month indicated the DOJ would not challenge the CVS-Aetna merger, but how the Trump administration will ultimately respond remains to be seen. One thing that's clear is that Jones has successfully blocked these sorts of deals in the past.

Jones reviewed three proposed health insurance mergers in 2016 alone, concluding that two of them were anti-competitive. He asked the DOJ to block the proposed Anthem-Cigna and Aetna-Humana mergers, and federal judges obliged.

That flurry of activity was a prologue of sorts to the proposed PBM deals on the table today.

Icahn's Concerns

A report by The Wall Street Journal on Wednesday suggested the proposed Cigna–Express Scripts deal may be on shaky footing as well.

Icahn, a hedge fund manager and one of the wealthiest people in America, plans to vote against the merger, believing $96.03 per share is too-high-a-price for Cigna to pay for Express Scripts, as the Journal reported.

Although the billionaire owns less than 5% of Cigna's outstanding shares, he reportedly may seek to persuade fellow shareholders to join him in opposing the deal. Icahn has cited fears of increased competition from Amazon in the healthcare industry, the Journal reported.

Shareholders are set to vote on August 24.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.

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