August 8, 2018

Cigna board slams investor’s opposition to Express Scripts merger

HBJ File Photo
HBJ File Photo
Cigna headquarters in Bloomfield.

A war of words has ensued between Cigna's board of directors and activist shareholder Carl Icahn, who members say lacks understanding of the Bloomfield insurer's proposed $67 billion acquisition of pharmacy benefits manager Express Scripts.

In a letter to shareholders Tuesday, Cigna's board of directors reaffirmed their commitment to the March 8 deal and urged shareholder support of the reorganization with Express Scripts that follows a major consolidation in the healthcare industry.

The letter responds to Icahn's recent comments urging Cigna shareholders to vote against the proposed merger, which he believes is overvalued and enters the companies into a highly competitive pharmacy market Amazon expects to join.

Instead, he prefers Cigna enter a multi-year partnership with Express Scripts or another PBM.

But Cigna's board on Tuesday said backing such a partnership proves his "lack of understanding of Cigna's business model" as the integrated medical and pharmacy service model has "been the cornerstone of Cigna's long-term strategy."

The board also downplayed Icahn and his affiliates' stake in the companies, which own 0.56 percent of the insurer's stock and a "substantial" short position in Express Scripts.

The members questioned why Icahn and his representatives have not contacted Cigna expressing their opposition, especially when nine of his businesses renewed their PBM contracts with Express Scripts over the last year.

"It is not clear that Mr. Icahn even believes his own rhetoric and so-called concerns with the Express Scripts service model," the board said.

The proposed deal, Cigna's board says, allows the insurer to improve front-end care management and reduce costs for acute medical services.

"We will not be able to inoculate ourselves from changes in the dynamic marketplace by sitting on the sidelines and hoping that others figure it out -- nor would we want to," the letter says, referencing that pharmaceutical costs will soon make up 25 percent of total healthcare costs.

The letter also cited supportive comments from industry experts and several Cigna and Express Scripts shareholders. Their comments shot down Icahn's remarks about flawed drug rebate regulation and disputed his claims that Express Scripts' business is struggling, referencing their strong second quarter earnings.

Cigna shareholders are expected to vote on the proposed Express Scripts merger Friday, Aug. 24, at the Delamar Hotel in West Hartford.

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