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Published on : Mar 09, 2018

The pricing of prescription drugs has been a complicated affair, especially in developed nations. Corporate clients and large buyers are increasingly concerned about the opacity of the entire costing process. In particular, what has been troubling them is whether the sizeable discounts offered by various regional governments, especially the U.S., are really passed to the consumers at large. To address such concerns, Cigna Corp, a U.S.-based global health services organization, on March 8, 2018 has inked a deal with Express Scripts Holding Co, a pharmacy benefit management organization, which is likely to positively impact the management of the cost benefits to large employees. Pharmacy benefit managers as third-party administrators are usually tasked with negotiating down the price of prescription medicines, notably in commercial and governmental health plans.

Takeover aimed at reining over Healthcare Costs and Prices of Specialty Drugs

The takeover deal, pegged at US$67 billion will also help Cigna to rein in over the declining profits, in the backdrop of rising healthcare costs and interest rate hikes. The deal is significant for market watchers and policymakers as it is considered to lead to a better coordination between costly health care and the pharmacy benefits aimed by governments. Of significance is the impact of the deal to help tide over the prices of specialty drugs. Furthermore, with this, Cigna intends to keep a track on the delivery of pricy drugs to patients.

Move inspired by Industry Consolidation Trends

However, the acquisition deal did not go favorably with some segments of the healthcare sector. The shares of Connecticut-based company tanked by over 11% post the announcement.  This also underscores the fact that some investors might see caveats in finalizing the deal. Notwithstanding this, the acquirer believe that the impact may well extend beyond the healthcare sector.

The industry is in a way is moving toward consolidations, driven by large mergers. For instance, CVS Health Corporation, a retail pharmacy and health care company, merged with Aetna Inc. last year in December.