Cigna, Express Scripts merger clears state hurdles
The deal awaits another state approval; It has already received the go-ahead from Department of Justice.
Cigna and Express Scripts have cleared two state hurdles to their merger, as New York and California insurance regulators approved the $67 billion merger.
The deal reportedly only awaits approval from the state of New Jersey.
The New York Department of Financial Services and the California Department of Managed Health Care approved the merger on Thursday.
New York Superintendent Maria Vullo said a hearing scheduled for January 10 would not be necessary after receiving commitments from the applicants in conditions of approval that address anti-competitive concerns.
Without these commitments, Express Scripts, within the Cigna holding company, could create the risk of increased costs of pharmaceuticals and insurance premiums paid by New York consumers, the decision and order said.
California also put conditions on the approval. Cigna and Express Scripts have agreed to not increase premiums as a result of acquisition costs and to keep premium rate increases to a minimum. They will also invest over $100 million in California healthcare initiatives, including the opioid crisis.
WHY THIS MATTERS
The merger between Cigna and Express Scripts is the second recent large vertical merger. CVS and Aetna finalized their consolidation last month.
The Department of Justice approved the deal in September.
WHAT ELSE YOU NEED TO KNOW
In California, Cigna and Express Scripts have agreed to support efforts to provide accurate, complete and accessible provider directories, and standardize and improve the quality of encounter data, which is essential for measuring quality of care and cost.
In New York, Express Scripts has committed to not opposing the department's proposed legislation to license and regulate PBMs.
New York said the Cigna and Express Scripts merger raised the question of the cost of pharmaceuticals. The top three pharmacy benefit managers control 70 percent of the business, the insurance regulator said.
"Express Scripts is one of the three PBMs with this dominant market power, and the Cigna/Express Scripts Merger would further concentrate its market power by removing Cigna, which currently owns and operates its own PBM, as a competitor in the PBM market," said New York's decision.
"Moreover, Express Scripts, as a PBM, would have the power to offer Cigna companies larger rebates or reduced fees than offered to other insurers. This would give Cigna an artificial competitive advantage that would draw policyholders away from other insurers and create an even larger market share for the enterprise. As a result, small and regionally-based carriers, without an affiliated PBM, may be disadvantaged, thereby harming markets and consumers."
The commitments signed by Cigna and Express Scripts include agreements that Cigna will not receive preferential pricing from Express Scripts, commitments to independent pharmacies, required reporting to the department regarding pharmaceutical rebates, and commitments to PBM transparency.
ON THE RECORD
"The conditions imposed on Cigna and Express Scripts will improve plan performance, increase access to healthcare services and assist in controlling healthcare costs," California Director Shelley Rouillard said.
Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com
