- Healthcare spending is increasing at a rate three times the Consumer Price Index per year, due to a rise in chronic diseases and an aging population.
- Pharmacy is the most widely used healthcare benefit, with prescription drugs representing a growing share of healthcare.
In an annual shareholder meeting, Cigna President and CEO David Cordani discussed numerous reasons the health insurer aims to acquire a pharmacy benefits manager making it clear it was not a defense against Amazon’s potential entry into healthcare.
In March 2018, Cigna signed a definitive agreement to acquire Express Scripts, a PBM, for $67 billion in cash and stock.
Here are four motivating factors for Cigna to purchase Express Scripts according to Mr. Cordani
1. The changing healthcare environment. Healthcare spending is increasing at a rate three times the Consumer Price Index per year, due to a rise in chronic diseases and an aging population. In addition, policies are driving healthcare from a focus on “sick-care” to a focus on keeping people healthy and out of the hospital.
“There is clear consensus around the need for a more sustainable health system,” explained Mr. Cordani. “[A system] that expands access to affordable, high-quality healthcare.”
In this evolving healthcare space, there is a need to offer customers greater affordability and choice, said Mr. Cordani. This is what initiated Cigna’s planned acquisition of Express Scripts it will allow both Cigna and Express Scripts customers to have affordable medications and care.
2. Pharmaceuticals are widely used and getting more expensive. “Pharmacy is the most widely used healthcare benefit, with prescription drugs representing a growing share of healthcare [spending],” said Mr. Cordani. “It has become crucial to manage and coordinate drugs with medical services holistically to reduce costs, preserve health and improve outcomes.”
The combination of Express Scripts and Cigna will provide consumers more choices to make healthcare more affordable.
3. Proactively ensuring the company’s wellbeing as opposed to a defensive move against disruptors. “The final question is whether we pursued a combination with Express Scripts in reaction to announcements by Amazon regarding healthcare, or other announced transactions in the industry. I want to be clear. This was not a defensive reaction,” Mr. Cordani said.
Rather, Cigna believes the potential acquisition will improve affordability and expand the reach of the company to deliver strong, differentiated results.
4. Express Scripts is a leader in the PBM space. In 2017, Express Scripps achieved the lowest pharmacy expense increase in 20 years, at just 1.5 percent meaning its clients experienced only a 1.5 percent price increase on average.
However, Mr. Cordani explained it was more than just the success as a PBM it’s their partnerships and employees that strive to improve healthcare for all.
“Express Scripts employs over 3,000 medical professionals who work closely with individuals and their doctors to close gaps in care by surrounding patients with quality care, applying technology to improve decision making by healthcare professionals, and making the use of medicines more affordable and accessible,” he said.
Date: Apr 27, 2018