Cigna’s acquisition of Express Scripts get vote of confidence from investor advisor ISS

Proxy advisor Institutional Shareholder Services recommends shareholders approve Cigna’s acquisition of Express Scripts, days after famed activist investor Carl Icahn called the deal a “folly.”

Icahn published a searing letter Tuesday opposing Cigna’s $54 billion acquisition of pharmacy benefit manager Express Scripts. Titled “Cigna’s $60 billion folly,” Icahn said buying the company “may well become one of the worst blunders in corporate history.”

Cigna says it and Express Scripts are complementary businesses that when combined can improve care for patients and lower health-care costs. Icahn argues looming regulatory risk combined with the possibility of Amazon disrupting the industry pose “existential threats to the PBM business model.”

Pharmacy benefit managers control which drugs are covered and negotiate discounts, known as rebates, on branded drugs with manufacturers. They’re a favorite target of drugmakers, who say these middlemen want higher drug prices so they can squeeze higher profits from rebates.

The Trump administration has vowed to re-examine this system. President Donald Trump spent a large chunk of his speech announcing his blueprint to lower drug prices attacking middlemen, who he said “won’t be so rich anymore.” Pfizer CEO Ian Read last week told Wall Street analysts he believes the Trump administration may eliminate rebates altogether.

Icahn called the looming threat of Amazon “an existential threat to PBMs like Express Scripts, possibly challenging their very existence.” Amazon does not currently operate in the prescription drug benefit space, though earlier this year it said it would acquire online pharmacy start-up PillPack.

Meanwhile, Cigna’s rival health insurer Aetna is in the process of being acquired by CVS Health. The roughly $69 billion deal would create a health-care powerhouse, combining insurance, prescription drug benefits and drugstores. Shareholders from both companies have already approved the deal, and CVS said Wednesday it expects it to close in the late third quarter or early fourth quarter.

Glenview Capital’s Larry Robbins came out in defense of the deal Thursday.

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