Express Scripts tells health plan clients not to worry over tie-up with competitor

March 10--Express Scripts CEO Tim Wentworth tried to assure his health plan clients this week that the company will help them remain competitive despite combining with one of the country's largest health insurers.

Express Scripts serves as the middleman between drug manufacturers and its 3,000 clients, which include employers and health plans.

The company uses its leverage to negotiate discounts on prescription drugs for its clients and Express Scripts is the nation's largest stand-alone pharmacy benefit managers (PBMs).

However, that stand-alone title will soon be erased as Express Scripts comes under the ownership of one of the nation's largest insurers, Bloomfield, Conn.-based Cigna.

This week Cigna said it will acquire north St. Louis County-based Express Scripts in a $67 billion deal that's expected to finalize before the end of the year, pending regulatory and shareholder approval.

However, there is some concern about whether its health plans will bristle over the fact that Express Scripts will be owned by an insurer, a potential competitor of its current health plan clients.

Currently, health plans represent one-quarter of Express Scripts' revenue, according to analysts with William Blair.

"While the PBMs have firewalls in place between the PBM and other areas of their business, some health plans have expressed discomfort with these arrangements," according to an analyst note from Goldman Sachs.

But Wentworth was adamant that nothing will change when the company combines with Cigna.

"We have a long history at Express Scripts of very strong guardrails that ensure we can service multiple health plans in different markets and help them achieve their objectives with our collaborative innovation with them -- that doesn't change," Wentworth said during Thursday's call with investors.

Even if some health plans are uncomfortable with the tie-up, they may find there are few places to take their business. The nation's largest PBMs are now part of a health insurance company.

Late last year, drugstore chain giant CVS said it was buying insurer Aetna. CVS operates its own PBM. UnitedHealthcare manages its own PBM in-house.

Some analysts say the concern about health plans leaving Express Scripts over its takeover by Cigna is overblown.

"Realistically there is no viable choice given all existing large PBMs have either walked down the aisle with an MCO or been spawned by one," Leerink analyst Ana Gupte said, using the term MCO, or managed care organization, another term for insurer.

Wentworth said Thursday he would begin calling on his health plan clients. He said he had already received some positive emails about the deal.

"Particularly for the health plans we serve, I want to be clear that our strong relationships that we have do not change, and we see great opportunities in how our expanded healthcare services business will help health plans win and grow," he said.

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