Calif., N.Y. approve Cigna-Express Scripts merger with conditions

By Shelby Livingston  | December 13, 2018

California and New York regulators approved health insurer Cigna Corp.’s acquisition of pharmacy benefit manager Express Scripts on Thursday, bringing the $67 billion deal a step nearer to closing.

The California Department of Managed Health Care approved the deal with conditions, including that the combined company not raise premiums to pay for the merger for five years and keep premium increases “to a minimum.”

In a statement, Shelley Rouillard, director of the department, said the conditions would “improve plan performance, increase access to healthcare services and assist in controlling healthcare costs.”

The department OK’d the merger between CVS Health and Aetna in November with similar conditions. That $70 billion deal closed later that month, though a federal judge warned them to stay separate until he gives his final approval.

New York regulators also approved the deal with conditions. The state’s financial services department had scheduled a public hearing to discuss the merger on Jan. 10, 2019, but decided it isn’t necessary.

State regulators said Cigna agreed it wouldn’t increase premiums for New York plan members to pay for the acquisition, and promised it wouldn’t receive preferential pricing from Express Scripts or exclude independent pharmacies from its network. The insurer also agreed to report the pharmacy rebates it receives and the amount returned to customers.

In a notice filed with the Securities and Exchange Commission on Thursday, Cigna said it continues to work with regulators in New Jersey, the final state where approval is needed. The company expects the deal to close by year-end. It was approved by the U.S. Justice Department in September.

The California managed-care department also said Cigna and Express Scripts also agreed to invest $60 million in the state’s healthcare system through Cigna’s accountable care organizations and by funding scholarships and loan repayment programs to increase the number of healthcare providers in underserved areas. Funds will also go to support programs that address social determinants of health and the opioid epidemic.

Some experts have questioned whether the conditions for approval required by some states are effective and enforceable. It would be difficult to determine whether a large company raised premiums as a result of an acquisition, for example.

In an explanation of the conditions, the California regulators noted that Cigna does not participate in the state’s individual or small group market, where premiums are subject to rate review. It does sell plans to large group customers, but the department does not review large group rates.