Written by Kainoelani Lee

And yet, another merger for healthcare consolidation has attempted to disrupt the healthcare industry.

Last week, health insurance giant Cigna proposed to buy Express Scripts, the largest pharmacy benefit management in the United States, for $67 billion.
With the announcement in January to create a national healthcare alliance, and a proposal for healthcare reform, the traditional healthcare industry has lately been under fire.

What better move from Cigna to team up with Scripts to potentially beat out any signs of competition. Amazon’s recent entrance into the pharmacy business, where they launched an exclusive line of over-the-counter health products, has left traditional companies to brainstorm alternative ways to compete.
Cigna and Express Scripts claim the merger will

benefit consumers by allowing the two companies to bring together patients’ medical and pharmacy histories to improve treatments and lower costs”, according to the New York Times.

If the deal is accepted, it would mean Scripts would no longer be considered a major independent pharmacy benefit manager organization. In the past, Scripts has focused on deal-making with pharmaceutical companies to decrease health costs for employers and consumers. Scripts Healthcare Administrators currently manage prescription plans for over 80 million Americans.

This step furthers our strategy to improve the affordability and value to the consumer in a more personalized way,” said Cigna’s chief executive, David Cordani.

The proposed merger has followed a similar situation, where CVS Pharmacy is currently pending a buyout at $69 billion for the ownership of Aetna.
Recently, the Cigna-Express proposal has been under scrutiny by federal regulators on whether the move would be truly beneficial for its healthcare consumers.
“History has shown where there are multiple mergers going on in a single industry, the Justice Department goes on high alert,” said David Balto, an antitrust lawyer who formerly worked for the Justice Department.

While consolidation may decrease healthcare costs, it does pose the issue that consumers may have limited options due to a tighter market and reduced pharmaceutical competition. The Cigna-Express merger “could result in restricted choices throughout the marketplace, ultimately leading to higher costs and potentially poorer coverage and care for consumers”, according to George Slover, senior policy counsel for Consumers Union.

The lack of other large independent pharmacy managers for small pharmacy businesses could lead to a reluctance of approval for the merger.
Due to the recent blockage of two massive healthcare deals by the Justice Department, many are skeptical on whether Cigna’s proposal will be approved.
But, some experts believe Cigna has a higher chance of approval by regulators due to their vertical rather than horizontal approach. Vertical integration can help companies reduce costs, decrease transportation expenses, and reduce turnaround time. With the Trump administration going head-to-head with the Affordable

Care Act, a legislation that was created under the Obama administration, consumers are concerned that healthcare costs could take off again. Due to many large health insurance and pharmaceutical companies in the mix, and healthcare in jeopardy for a vast majority of Americans, the healthcare industry will continue to be a sensitive conversation.

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References:

Andrew Soergel (n.d.). Cigna to Buy Express Scripts for $67 Billion. US News & World Report. Retrieved from https://www.usnews.com/news/economy/articles/2018-03-08/cigna-to-buy-express-scripts-for-67-billion

Paul R. La Monica (8 Mar. 2018.). What merger mania means for health care. CNNMoney. Retrieved from http://money.cnn.com/2018/03/08/investing/health-care-mergers-cigna-express-scripts-consolidation/index.html

Paul R. La Monica (8 Mar. 2018.). What merger mania means for health care. CNNMoney. Retrieved from http://money.cnn.com/2018/03/08/investing/health-care-mergers-cigna-express-scripts-consolidation/index.html

Experts, Our (n.d.). Cigna-Express Scripts Merger Presents Rx Choice Trade-Offs. Bna.com. Retrieved from https://www.bna.com/cignaexpress-scripts-merger-n57982089694/