California, New York OK Cigna-Express Scripts deal with conditions
- The California Department of Managed Healthcare and New York's Department of Financial Services both approved Cigna's $67 billion takeover of Express Scripts with conditions, the two announced Thursday. The combined company has promised not to raise premiums due to the costs associated with the transaction, according to the California agreement and New York's. The California deal also stipulates that the company "keep premium rate increases to a minimum," without listing any other specifics.
- In New York, the combined company has committed to maintaining its current product offerings, service areas and networks. After touting the expected synergies from the deal, the entity will have to document those benefits to the NYDFS every year for three years.
- In California, the company also promised to pump $60 million into various healthcare programs and initiatives across the state. For example, it is required to spend $35 million over five years to support joint ventures, delivery system alliances and collaborative accountable care initiatives, according to the agreement.
With approval from New York and California regulators, the Cigna-Express Scripts deal is now waiting on approval from New Jersey, company officials told Healthcare Dive.
As blockbuster mergers have continued in the healthcare sector, regulators have imposed various conditions.
Rival CVS and Aetna cleared federal antitrust scrutiny only after the payer promised to sell off its Medicare Part D business. Most recently, Massachusets approved what will become the second-largest health system in the state after the two agreed to price caps for a seven-year period.
The healthcare sector is rapidly consolidating as firms try to scale and shelter themselves from various headwinds and to compete with other firms that are bulking up.
The lines are now blurring between pharmacy benefit managers, which used to operate independently, and insurers. Now, many payers have gobbled up PBMs.
By combining both the medical and pharmaceutical benefit under one umbrella, analysts say companies can potentially achieve greater costs savings than may have been possible with separate entities. For example, if a patient is prescribed a particular drug the overall drug spend may increase, but it could result in savings on the medical side if it prevents a costly hospital visit.
The Cigna-Express Scripts deal already cleared some antitrust hurdles after the Department of Justice declined to challenge the megamerger in September. Shareholders have also approved the deal.
Cigna and Express Scripts pushed back the merger deadline six months to June 8, according to a November SEC filing. If the deal isn't closed on or before the deadline, it allows either company to terminate the agreement.
However, Cigna and Express Scripts still expect the deal to close this year, according to the same filing.