Uncertainty surrounds potential mega-healthcare mergers as the CVS-Aetna deal and Cigna’s acquisition of Express Scripts are in question. Just last year, the Justice Department thwarted the Cigna-Anthem and Aetna-Humana mergers.
The California Insurance Commissioner is adamant that the CVS-Aetna $69 billion merger proposal be blocked by the Justice Department. The commissioner is concerned if the acquisition moves forward competition will decrease and subsequently, prices will increase–according to CNN Money.
Carl Icahn of Icahn Enterprises has now engaged in a public battle to stop the Cigna and Express Scripts deal, stating it carries a ridiculous price tag and is essentially a “$60 billion folly.” In an open letter to Cigna’s shareholders, Icahn listed several “existential risks” the insurer faces if the deal goes through, including regulatory and competitive risk. He called the deal a “travesty” when comparing the value of the two companies and potentially “one of the worst blunders in corporate history.” Read the full letter here.
Cigna’s CEO David Cordani has spoken up to CNBC about the letter, saying he was “disappointed” that Icahn chose to express his concerns about the $54 billion deal in an open letter rather than contacting the company directly.
Amazon is also posing a threat to health retailers after June’s acquisition of PillPack that caused CVS and Walgreens’ shares to plummet. PillPack already has pharmacy licenses in all 50 states and pairs nicely with Amazon’s healthcare company conglomerate including JPMorgan Chase and Berkshire Hathaway.
It is still not clear if antitrust regulators will give CVS and Aetna the thumbs up, but reports last month suggest the Justice Department will green light the deal. Although it means that an insurance company and a company that helps set drug prices will combine forces, the deal has a higher survival rate as a vertical merger rather than horizontal. Shareholders have also already approved the proposal.
Walgreens and Walmart may begin to have a larger presence in healthcare as the drugstore (at the corner of happy & healthy) recently agreed to purchase an ample amount of Rite-Aid stores (over 1,900) and Walmart may be inclined to bulk up its already formidable pharmacy business.
Check out this CNN Money article for more on the merger buzz.
For more information on Walgreens and their move on the Dow, click here.
To read more about Icahn’s crusade, visit CNBC.