Sunday, 15 July, 2018

Cigna and Express Scripts in $67 bn health merger

Huffman High School is seen behind Birmingham Police cars after at a shooting Wednesday Huffman High School is seen behind Birmingham Police cars after at a shooting Wednesday
Melinda Barton | 09 March, 2018, 03:53

USA health insurer Cigna today announced a $67-billion deal to acquire pharmacy benefits manager Express Scripts, adding to the list of mergers and acquisitions in the sector, as insurers try to tackle soaring healthcare costs.

As the outcry over high drug prices has intensified in recent years in the USA, the pharmaceutical industry has blamed the pharmacy benefits managers for not always passing on to patients the rebates they negotiate.

Cigna's President and CEO David Cordani said the deal would drive quality and affordability for consumers. PBMs help to negotiate discounts with drugmakers.

All told, the companies project $600 million in annual savings.

Express Scripts Holding Company (NASDAQ:ESRX) under comprehensive financial analysis presented as an active mover. About 19.50 million shares traded or 361.77% up from the average.

In the last few years several other big health insurers have created their own pharmacy benefits management businesses, while late last year, drugstore chain and pharmacy benefits manager CVS agreed to buy insurer Aetna for $69 billion.

Cigna plans to fund the cash portion of the near US$53bn acquisition through a combination of cash on hand, Express Scripts debt and new debt issuance.

In plain English, that means the mergers aren't ones where two similar companies are looking to combine and take a competitor out of the market. Anthem said in October that it planned to start its own business to manage prescription-drug plans, partnering with CVS.

The deal reflects pressure on United States healthcare companies to grow bigger in order to cut costs. The Justice Department sued to block both deals.

That deal is sure to get scrutiny: Regulators have blocked some of the industry's biggest mergers, including one proposed by Cigna and Anthem Inc. and another attempted by Aetna and Humana Inc.

The changes across the health-care landscape come amid widespread frustration among USA businesses and individuals over the complexity of a system in which doctors, hospitals, insurers and pharmaceutical companies have different, often competing, interests. Analysts say it will eventually provide Cigna an opportunity to attract more clients by having an in-house pharmacy benefits manager.

More notable recent Express Scripts Holding Company (NASDAQ:ESRX) news were published by: Prnewswire.com which released: "Express Scripts Holding Company Announces Webcast of Investor Day Meeting" on February 21, 2018, also Reuters.com with their article: "BRIEF-Cigna To Acquire Express Scripts For $67 Billion" published on March 08, 2018, Courant.com published: "Cigna To Buy Express Scripts in $67 Billion Deal" on March 08, 2018. However, the Cigna offer represents a premium of more than double that stock move based on where Express Scripts closed on Wednesday. Upon closing of the transaction, Cigna shareholders will own approximately 64% of the combined company, and Express Scripts shareholders will own approximately 36%.

Express Scripts has long pitched itself as an independent player whose main focus is lowering medical costs by striking deals with drug companies on behalf of insurers and large employers.

The deal is "clearly a positive turn of events" for Express Scripts, Evercore ISI's Ross Muken wrote. Finally, Mizuho set a $86.00 target price on Express Scripts and gave the stock a hold rating in a research note on Wednesday, January 24th.

Fitch puts Cigna's rating on review for downgrade Thursday on expectations leverage at the company will increase to about 3.2 times earnings from a multiple of 1.5 now.

The insurer said it obtained fully committed debt financing from Morgan Stanley Senior Funding and The Bank of Tokyo-Mitsubishi UFJ Ltd for the deal.