Cigna, Humana put the brakes on possible merger

Less than two weeks after news of a possible merger was made public, Cigna and Humana are putting the brakes on the deal.

The Wall Street Journal and Reuters reported Monday that Cigna instead will focus on returning cash to investors through a $10 billion buyback.

Reuters reported the pair couldn't agree on a merger price and haven't given up on the idea of resuming talks in the future. But the news service noted that Cigna late Sunday unveiled plans to boost its share-buyback authority to $11.3 billion, with the aim of purchasing at least $5 billion by the first half of next year.

A big impediment to any potential tie-up between Cigna and Humana would likely come from the Federal Trade Commission, which has taken a far more active role in challenging megamergers under the leadership of Lina Khan.

The FTC has, in fact, cautioned the three largest pharmacy-benefit managers – CVS's Caremark, Cigna's Express Scripts and UnitedHealth's OptumRx – of likely changes to the industry's broader regulation.

Humana is the No. 2 provider in the Medicare Advantage space, with 18% of the market – about 5.5 million enrollees, KFF reports. Meanwhile, Cigna holds about 2% of the Medicare Advantage market, with 600,000 enrollees.

Both companies have significant capabilities in the health care services space. Humana owns CenterWell, which includes home health care, primary care and pharmacy services. Cigna owns Evernorth Health Services, which offers pharmacy services as well as behavioral health services.

Cigna also owns Express Scripts, the second-largest pharmacy benefit manager in the nation, while Humana owns the fourth-largest PBM.

Although Humana has a large piece of the Medicare Advantage pie, the company isn’t strong and commercial and employer coverage, while Cigna has a strong presence in those areas. Meanwhile, Cigna has found success selling individual coverage in the Affordable Care Act marketplace.