U.S. health insurer Cigna (NYSE: CI) said on Thursday it would buy pharmacy benefits manager Express Scripts (NASDAQ: ESRX) for about $54 billion, the latest deal in the sector aimed at tackling soaring health-care costs.
The move follows the $69 billion merger of insurer Aetna (NYSE: AET) and drugstore chain CVS Health (NYSE: CVS) announced last December, and highlights a sector-wide trend toward deals between companies that do not have directly overlapping operations.
The deals seek to lower healthcare costs by bringing under one roof pharmacy and medical claims, and give the combined entities greater leverage in price negotiations with drug makers.
Cigna's offer consists of $48.75 in cash and 0.2434 shares of stock of the combined company for each Express Scripts share, amounting to $96.03 per share. That represents a premium of nearly 31% to Express Scripts' Wednesday closing price.
The transaction is valued at $67 billion, including about $15 billion in Express Scripts' debt.
Pharmacy benefit managers administer prescription drug programs for health insurers, self-insured companies and government agencies, negotiating deals with drug manufacturers, working with pharmacies and processing claims.
The CVS-Aetna deal was seen pressuring rival insurers, drug makers, PBMs and retail pharmacies to consider mergers or switching partners to try to keep up with the potential healthcare cost savings or increase in profit margins.
The wave of consolidation in the sector also comes in the backdrop of a shifting landscape, including changes in the U.S. Affordable Care Act, rising drug prices and the threat of competition from Amazon.com Inc.
Cigna shares plummeted $13.31, or 6.9%, to $180.94, while Express shares popped $11.01, or 15%, to $84.43