California DMHC Approves Cigna-Express Scripts Merger with Conditions

Today, California's Department of Managed Health Care (DMHC) approved the merger of Cigna and Express Scripts. Continuing the trend of "diagonal mergers," the approval of the merger of Express Scripts, a major pharmacy benefit manager (PBM), and Cigna, one of the nation's largest insurers is just weeks before new laws take effect in California to increase public oversight over health mergers and PBMs.
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For immediate release: Thursday, December 13, 2018

For more information, contact:
Anthony Wright, executive director, Health Access California, 916-870-4782 (cell)
Rachel Linn Gish, director of communications, Health Access California, 916-532-2128 (cell)

MERGER WATCH: 

CALIFORNIA DMHC APPROVES CIGNA-EXPRESS SCRIPTS MERGER WITH CONDITIONS

HEALTH ADVOCATES STILL CONCERNED ABOUT IMPACTS, CALL ON NEW GOVERNOR TO USE STRONGER OVERSIGHT OVER HEALTH INDUSTRY THAT GOES INTO EFFECT IN 2018

  • California’s Department of Managed Care today approved a “diagonal” merger between Cigna and Express Scripts, with conditions on correcting deficiencies, improving access to care and quality, and making investments in the state’s health system.
  • Health & consumer advocates raised concerns about the proposed merger at state agencies in hearings earlier this year, arguing that it reduces competition, potentially driving up costs for consumers. 
  • Legislation passed this year, going into effect on January 1, 2019, will create additional oversight for pending and future mergers
    • AB 595 (Wood) gives Department of Managed Health Care (DMHC) increased authority over health plan mergers like this, and
    • AB 315 (Wood) requires more transparency on pharmacy benefit managers.

SACRAMENTO, CA—Today, California’s Department of Managed Health Care (DMHC) approved the merger of Cigna and Express Scripts. Continuing the trend of “diagonal mergers,” the approval of the merger of Express Scripts, a major pharmacy benefit manager (PBM), and Cigna, one of the nation’s largest insurers is just weeks before new laws take effect in California to increase public oversight over health mergers and PBMs.

“Mergers like this have major impacts on the health care system we all rely on, including what choices consumers have and what we pay. While we appreciate the conditions placed on this merger, we continue to be concerned about the impact this deal will have on our health system, and about the broader trend towards greater consolidation and higher health costs,” said Anthony Wright, executive director of Health Access California, the statewide health care consumer advocacy coalition.

“Many of these conditions placed on Cigna are about getting them to comply with existing consumer protections with regard to timely and geographic access to care, and to correct deficiencies in the company’s reporting and behavior. We hope the DMHC is vigilant in ensuring Cigna addresses its deficiencies, and that meets its other commitments, on improving access to care and boosting its quality ratings. The investments announced are important, but we note they are a relatively small fraction of the billions of dollars of the newly-merged corporation’s profit. In addition to the condition that the new company contract with unaffiliated entities, we need to watch closely to see how the increased market power of Cigna and Express Scripts impacts the health care system for all Californians.”

Earlier this year, consumer advocates expressed concern over the continuing consolidation of the health industry, and the Cigna-Express Scripts merger in specific, in public hearings and in this letter to the Department of Managed Health Care, archived on the Health Access website: https://health-access.org/wp-content/uploads/2018/10/Final-HAC-Letter-on-Cigna-Express-Scripts-Merger-10-10-2018.pdf 

As the letter states, between 2015 and 2017, Cigna had 14 enforcement actions, which amounted to $285,000 in fines. Additionally, a recent June 2018 DMHC Routine Plan Survey Follow-Up Report found that Cigna had not corrected 9 out of 15 deficiencies identified in the 2016 Final Report. The conditions require these problems to be corrected, and address some, but not all, of the requests by consumer advocates. Health Access had requested additional protection on prescription drug access,and clearer standards to prevent premium increases and ensure any savings is passed to payers and the public.

The California Legislature and Governor Brown passed AB 595 by Assemblymember Wood this year which would institute stronger state oversight over health plan mergers and protects Californians from changes to the health plan market that may lead to higher health costs. Also enacted was AB 315 by Assemblymember Wood which adds oversight to pharmacy benefit managers like Express Scripts. By regulating PBMs and requiring disclosure of information on rebates and discounts, this new law will help ensure that consumers and purchasers actually benefit from savings that are reaped by PBMs. Both of these laws will take effect on January 1, 2019 and will affect any pending and future health plan mergers.

“We look forward to the implementation of new laws next year in California that will bring a stronger voice for patients and the public interest for these mergers in general, and for pharmacy benefit managers specifically. New leadership in California, including a new governor, can and should exercise new authority to put tougher oversight over such transactions in the future. California policymakers need to watch closely to ensure that these companies fulfill the promises they made under the conditions of the merger,” said Wright.