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Health insurer Cigna Corp’s $52 billion acquisition of pharmacy benefits manager Express Scripts Holding Co has passed U.S. antitrust scrutiny, the companies said on Monday, allowing them to proceed with a combination they say will lead to lower costs by better coordinating pharmacy and medical benefits.

Wall Street analysts had expected antitrust approval as the companies have little overlap in their businesses. The decision bodes well for the pending U.S. antitrust review of CVS Health Corp’s proposed $69 billion acquisition of health insurer Aetna Inc.

The new company will marry Cigna’s business of managing health plans for corporations and the government with Express Scripts’ role handling pharmacy benefits for those same customers. Express Scripts also owns specialty pharmacies that distribute pricey drugs.

“We are pleased that the Department of Justice has cleared our transaction and that we are another step closer to completing our merger,” Cigna Chief Executive David Cordani said in a statement.

The Justice Department review of CVS’s planned purchase of Aetna may conclude this month, but will take longer because of divestitures needed to resolve competitive concerns, a source familiar with the matter told Reuters.

CVS spokeswoman Carolyn Castel said the company continues to expect to close its deal late in the third quarter or in the fourth quarter, a forecast it gave investors on Aug. 8 during a conference call.

The Justice Department in 2016 successfully blocked a pair of large health insurance mergers it believed would limit competition in the industry. Those were Aetna’s plan to acquire smaller U.S. health insurer Humana Inc for $37 billion, and a planned $54 billion combination of insurers Anthem Inc and Cigna.

Aetna and Cigna, however, were determined to seek growth through deals while responding to a changing healthcare landscape, eventually targeting mergers with the nation’s largest pharmacy benefit managers (PBMs).

“We believe these two transactions add more pressure on Humana to move further down the path of vertical integration,” William Blair analyst John Kreger said. “We suspect other health plans will look to follow suit.”


Antitrust experts have described the current deals as vertical combinations that present fewer issues than the failed insurer mergers. That view was bolstered after the Justice Department lost its case to stop AT&T’s acquisition of media company Time Warner. The department is appealing the decision.

“Everyone is feeling the pressure right now ... to react to disruption in the healthcare industry,” said Brad Haller, a director in West Monroe Partners’ mergers & acquisitions practice.

That disruption includes Amazon’s moves into healthcare. The world’s largest online retailer purchased online pharmacy PillPack, which Wall Street analysts say can help it undercut traditional prescription drug sales.

Amazon has also aligned itself with JPMorgan Chase & Co and Warren Buffett’s Berkshire Hathaway Inc to experiment with new business models for employee healthcare - one of Cigna’s target markets.

Cigna’s purchase of Express Scripts comes as PBMs’ role in prescription drug costs has come under scrutiny.

The administration of U.S. President Donald Trump has said it is looking at how so-called industry middlemen and pharmacies such as Express Scripts and CVS impact drug costs for U.S. consumers. The administration is looking at implementing a rule that could change or eliminate the use of rebates from drugmakers to PBMs that critics say contribute to higher drug prices.

Cigna and Express Scripts said they have already obtained clearances for the deal from departments of insurance in 16 states and are working with regulators in remaining jurisdictions to obtain clearance for the merger.

“States could still conduct a public hearing ... though it is very unlikely that they do not align with the U.S. Department of Justice’s decision,” Leerink analyst Ana Gupte said.

The companies continue to expect the deal to close by the end of the year, subject to the satisfaction of all closing conditions.

Cigna shares closed up 1.4 per cent at $197.84, while Express Scripts shares closed up 3.7 per cent at $95.23. CVS and Aetna shares also rose, closing up 1.5 per cent and 1 per cent, respectively.

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