Proposed Cigna-Humana Merger Raises Stakes for Healthcare Access Amid Election Uncertainty
Cigna Group and Humana are once again discussing a merger that could create a $140 billion insurance giant, further consolidating the U.S. healthcare system. The talks are in preliminary stages after collapsing last December over disagreements about financial terms. FierceHealthcare notes that while discussions have resumed, no formal agreements have been made yet.
The stakes of this merger extend far beyond corporate boardrooms; it directly impacts millions of people's access to essential healthcare services and affordable medications. With Cigna’s Express Scripts commanding 24% of the PBM market and Humana operating the fourth-largest PBM with 8%, the merger raises serious questions about market concentration and its impact on healthcare affordability and accessibility.
Election Outcome Could Determine Merger’s Fate
The timing of the renewed merger talks between Cigna and Humana is no coincidence, occurring just weeks before a presidential election that could heavily influence the merger’s prospects. Bloomberg reports, Wall Street analysts believe that the deal's future hinges on the election outcome, with talks likely "only tangibly moving forward if Trump wins."
Under a Trump Administration, a more favorable regulatory environment might be expected given the GOP's general preference for deregulation. However, skepticism about large corporate mergers from Trump's base and running mate JD Vance complicates this picture. Vance has even praised current FTC Chair Lina Khan, saying she is "one of the few people in the Biden Administration who I think is doing a pretty good job," indicating a potentially less favorable view of healthcare consolidation than the GOP has historically maintained. On the other hand, a Harris Administration would likely continue the Biden Administration's stricter stance on healthcare consolidation, focusing particularly on protecting underserved and rural communities.
TD Cowen analyst Ryan Langston suggests that any formal merger announcement before the election is unlikely, further underscoring the centrality of the election to the deal’s future. Meanwhile, federal scrutiny of pharmacy benefit managers (PBMs) remains high, with the Federal Trade Commission (FTC) accusing the largest PBMs of using negotiation tactics that inflate drug costs, adding another layer of complexity to the regulatory landscape.
Understanding the Scale and Implications of the Proposed Merger
The proposed Cigna-Humana merger would unite two companies with largely complementary business models. Modern Healthcare reports that Cigna dominates in commercial coverage with 16.1 million members, while maintaining a smaller Medicare presence. In contrast, Humana has fewer than 600,000 commercial customers and is withdrawing from employer-sponsored insurance, while standing as the second-largest Medicare insurer with 8.8 million members.
This complementary structure could ease some antitrust concerns, but the combined PBM operations present a more complex challenge. The American Medical Association's (AMA) position on the CVS-Aetna merger highlighted similar concerns, noting that such consolidation can limit competition and reduce patient access to specialty drugs, which may parallel the challenges presented by this merger. Healthcare Huddle's analysis suggests that a merger would create a PBM entity large enough to rival market leader CVS Caremark, potentially controlling 32% of the market. Such concentration in the PBM space has already drawn scrutiny from regulators and policymakers.
To address regulatory hurdles, Cigna is planning to finalize the sale of its Medicare Advantage business to Health Care Service Corporation for $3.3 billion, a move that Modern Healthcare suggests could ease antitrust concerns by eliminating overlapping services. Meanwhile, Humana has faced challenges, with its value dropping nearly 40% this year due to declining Medicare plan enrollments and performance shortfalls resulting in the Centers for Medicare and Medicaid Services (CMS) downgrading their Medicare Advantage (MA) plans’ star ratings.
The combined entity would have a market capitalization of around $121 billion based on October 2024 valuations. While still smaller than UnitedHealth Group's $528 billion market cap, the merger would establish a stronger competitor across both the insurance and PBM markets, potentially reshaping competitive dynamics in the healthcare sector.
PBM Consolidation: Increased Scrutiny as FTC Takes a Stand
The potential merger's impact on pharmacy benefit management deserves particular attention, especially given recent FTC actions against PBMs. Currently, three PBMs control approximately 80% of the market, with Cigna's Express Scripts commanding about 24% and Humana's pharmacy division holding 8% market share, according to Bloomberg Law analysis.
The timing is particularly sensitive given the FTC's September 2024 administrative complaint against major PBMs. As previously reported by CANN, the FTC alleges these companies engaged in anticompetitive rebating practices that artificially inflated drug prices. The FTC investigation has revealed troubling practices, with PBMs frequently prioritizing higher rebates over lower net prices, leading to the exclusion of lower-cost alternatives and driving up drug prices. A combined Cigna-Humana PBM would control 32% of the market, potentially creating an entity large enough to rival market leader CVS Caremark.
This level of concentration raises serious concerns about negotiating power and drug pricing. Bloomberg Law notes that employer groups are particularly wary of the merger, fearing it could make an already complicated market even more opaque for health plans and potentially lead to higher costs for company health plans.
Impact on Healthcare Access and Specialty Care
Healthcare consolidation has long presented significant barriers for patients who rely on specialized care, including those living with chronic conditions like HIV. For example, patients often face more restrictive formularies, meaning fewer options for necessary medications, and increased prior authorization requirements, which can delay access to critical treatments. This is especially problematic for patients with chronic conditions like HIV, where timely and consistent access to specific medications is critical for maintaining health. Research published by Tufts Center for the Evaluation of Value and Risk in Health shows that consolidation often leads to restricted specialty care access, which can be particularly detrimental to people requiring ongoing care management. For instance, patients with cancer may find it harder to access specialized oncologists or newer, targeted therapies due to narrower provider networks and limited formularies. These barriers do more than inconvenience patients—they delay treatments, ultimately impacting patient outcomes.
The National Academy for State Health Policy (NASHP) reports that consolidated health systems frequently use their market power to implement restrictive contracts that can limit patient choice. These contracts often include clauses that prevent insurers from steering patients to higher-value care providers or limit the ability to negotiate better prices, ultimately restricting patient options and driving up healthcare costs. This can particularly impact people relying on specialty medications and services, like those living with HIV who need consistent access to specialists and specific drug regimens.
Consolidated systems often impose more stringent prior authorization requirements and narrower specialty pharmacy networks, as noted in the BMC Health Services Research study. The AMA highlights that merged entities often use their power to make access to specialty drugs more restrictive, which further limits patient options and exacerbates challenges for those needing specialized care. For people living with HIV, disruptions or delays in accessing antiretroviral medications could have serious health implications.
The combined entity's negotiating power could lead to more restricted provider networks. NASHP's research shows that consolidated entities often leverage market power to demand higher reimbursement rates, resulting in narrower networks that limit access to specialists, including HIV care providers.
Navigating Complex Regulatory Hurdles
The proposed Cigna-Humana merger faces significant regulatory scrutiny at both federal and state levels. The merger is likely to undergo a 12- to 24-month regulatory review, particularly given the current antitrust enforcement environment. Regulatory challenges are expected to include a detailed examination of the potential impact on competition, particularly in the PBM market, and whether the merger could lead to increased healthcare costs for consumers. The recent FTC crackdowns on healthcare companies, which could provide additional insights into the type of scrutiny expected during the review, particularly regarding anti-competitive practices and market concentration. Both the FTC and the U.S. Department of Justice are likely to scrutinize any potential overlap in services and demand divestitures to ensure that competition remains intact. Additionally, state-level reviews could require concessions to protect local markets from becoming overly concentrated.
Kaiser Family Foundation's analysis highlights how the FTC and Department of Justice have increased their focus on both horizontal and vertical integration effects. They now examine broader implications for healthcare costs and access, beyond direct market overlap.
State-level review adds another layer of complexity. KFF notes that 34 states and DC require notification of health insurance mergers, with 13 states requiring explicit approval. This multi-state review process could extend the timeline and require concessions to address state-level concerns.
Looking Ahead: Implications for Healthcare Access and Affordability
The proposed Cigna-Humana merger represents more than a business combination—it embodies the tension between market consolidation and healthcare accessibility. While the companies argue that their complementary business models could improve efficiency, the merger's impact on PBM market concentration and healthcare access demands careful scrutiny.
The immediate path forward hinges significantly on the November 5th election outcome, with analysts suggesting meaningful progress is unlikely before then. Beyond the election, the regulatory review process could extend into 2026, as federal and state regulators examine the merger’s implications for competition, drug pricing, and healthcare access.
For healthcare stakeholders, especially those relying on specialty care and medications, the merger’s outcome could significantly impact their care access and costs. The combined entity's expanded market power in both insurance and PBM sectors could reshape provider networks, prior authorization processes, and drug formulary designs.
Advocacy organizations and policymakers must carefully monitor and engage in the regulatory review process to ensure that any approved merger includes meaningful protections for healthcare access and affordability. The FTC’s current focus on PBM practices provides an important opportunity to address long-standing concerns about drug pricing and access in any merger approval conditions.
FTC Sues Major PBMs for Unfair Practices Affecting Drug Costs
Pharmacy Benefit Managers (PBMs) have long been influential yet often obscure intermediaries in pharmaceutical pricing and distribution. They negotiate drug prices with manufacturers, develop formularies for health plans, and manage pharmacy networks. Today, the three largest—CVS Caremark, Express Scripts, and OptumRx—control about 80% of the market.
On September 20, 2024, the Federal Trade Commission (FTC) filed an administrative complaint against these major PBMs and their affiliated group purchasing organizations (GPOs). The complaint alleges that they engaged in anticompetitive and unfair rebating practices, artificially inflating insulin prices and impairing access to lower-cost alternatives.
The FTC's action marks a critical juncture in the struggle for fair drug pricing and access, emphasizing the need for robust enforcement and comprehensive PBM reform. The outcome could reshape the healthcare industry and significantly impact care across the United States.
The FTC's Case Against PBMs
The FTC alleges that PBMs have engaged in anticompetitive and unfair rebating practices that have artificially inflated the list prices of insulin and other essential medications. Grounded in Section 5 of the Federal Trade Commission Act, which prohibits unfair competition and deceptive practices, the FTC asserts that PBMs' rebate strategies and patient steering harm consumers and competition.
For example, the list price of Humalog, a widely used insulin product, increased from $21 in 1999 to over $274 in 2017—a rise of more than 1,200%. The FTC argues that this dramatic inflation is linked to PBMs' "chase-the-rebate" strategy, where they demand larger rebates from manufacturers in exchange for favorable formulary placement.
Another key aspect of the complaint focuses on patient steering practices. The FTC alleges that PBMs have systematically excluded lower-cost insulin alternatives from their formularies in favor of higher-priced options that generate larger rebates. This practice limits choice and forces many to pay more out-of-pocket for their medications.
Rahul Rao, Deputy Director of the FTC's Bureau of Competition, emphasized: "Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to powerful PBMs and their greed."
The FTC seeks to fundamentally change how PBMs operate. The complaint aims to prohibit PBMs from excluding or disadvantaging lower-cost versions of drugs, prevent them from accepting compensation based on a drug's list price, and stop them from designing benefit plans that base out-of-pocket costs on inflated list prices rather than net costs.
FTC Chair Lina Khan stated, "The FTC's administrative action seeks to put an end to the Big Three PBMs' exploitative conduct and marks an important step in fixing a broken system—a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers."
Impact on People Living with HIV
While the FTC's case primarily focuses on insulin pricing, PBM practices significantly affect people living with HIV (PLWH) and other chronic conditions. Recent cases highlight the challenges faced in accessing affordable medications due to PBM and insurer practices.
In April 2024, CVS Health failed in its latest attempt to dismiss a class action lawsuit alleging discrimination against PLWH by requiring them to receive medications via mail order, limiting access to essential pharmacy services and counseling. U.S. District Judge Edward Chen noted that CVS was on notice that this program could likely discriminate against PLWH, as plaintiffs had repeatedly requested to opt out.
In another case, the U.S. Department of Health and Human Services Office for Civil Rights (OCR) closed a complaint without penalties against Blue Cross Blue Shield of North Carolina (BCBS NC) after the insurer lowered the pricing tier for HIV medications. The original complaint alleged that BCBS NC had placed almost all HIV antiretroviral medications, including generics, on the highest-cost prescription tiers.
While BCBS NC changed its formulary, the lack of penalties raises concerns about enforcement and accountability. Carl Schmid, executive director of the HIV+Hepatitis Policy Institute, expressed disappointment: "It was incredibly disheartening and deeply concerning to see them let the state's largest insurer get away with such blatant discrimination."
These cases illustrate how PBM practices and insurer policies create significant barriers to care for people living with HIV. High out-of-pocket costs, restricted pharmacy access, and discriminatory formulary designs can lead to medication non-adherence, resulting in adverse health outcomes and increased healthcare costs in the long term.
In North Carolina, about 37,000 people are living with HIV, with Black people representing 58% of new HIV diagnoses despite being only 22% of the state's population. Nationally, according to the Centers for Disease Control and Prevention (CDC), approximately 1.2 million people in the United States are living with HIV. PBM practices that inflate drug costs or limit access exacerbate these disparities and hinder efforts to end the HIV epidemic.
PBM Practices Under Scrutiny
The FTC's complaint has brought controversial PBM practices into sharp focus, highlighting concerns long raised by patients, healthcare providers, and policymakers.
The FTC's interim staff report reveals that PBMs often prioritize higher rebates over lower net prices, leading to exclusion of lower-cost alternatives and driving up drug prices—a practice known as "rebate walls." Patient steering directs consumers to PBM-owned pharmacies, limiting choice and disadvantaging independent pharmacies.
A Congressional hearing in July 2024 further exposed these issues. PBM executives faced tough questioning about their role in rising prescription drug costs. Lawmakers pressed the executives on how PBMs have monopolized the pharmaceutical marketplace and pushed anticompetitive policies that undermine local pharmacies and harm patients.
Representative Virginia Foxx (R-N.C.) highlighted the lack of transparency, questioning PBM executives about the pass-through of rebates and fees to plan sponsors. The executives' responses did little to clarify the complex and opaque financial flows within the PBM industry.
PBMs defend their practices as necessary for managing drug costs. Phil Blando, Executive Director for Corporate Communications at CVS Caremark, stated, "We work to negotiate the lowest net cost for drugs... driving better health outcomes and lower out-of-pocket costs for consumers." However, critics argue that these claimed benefits are not reflected in patient experiences or overall drug pricing trends.
Real-World Impact on Patients and Pharmacies
Jeremy G. Counts, PharmD, a spokesperson for Pharmacists United for Truth and Transparency (PUTT), explains that the vertical integration of the Big Three PBMs allows them to limit access through restrictive networks, under-reimbursement, and aggressive patient steering. These practices harm independent pharmacies and jeopardize health by disrupting continuity of care.
Restrictive Networks and Steering: PBMs often require patients to use their own pharmacies, frequently through mail order, misleading them into believing they have no other options. Even when plans allow the use of independent pharmacies, PBMs make it tedious to opt out, effectively limiting choice.
Under-Reimbursement and Clawbacks: Independent pharmacies that serve patients despite low reimbursements face financial strain. PBMs may pay below cost or use fees and recoupment methods to claw back margins, forcing some pharmacies to turn away patients.
Barriers to Medication Access: PBMs impose onerous prior authorization processes for medications that do not provide them with high rebates, delaying care and increasing costs. Counts notes that this has become a deadly issue in oncology care.
Aggressive Patient Pursuit: For profitable medications, PBMs aggressively pursue patients and their prescriptions, sometimes transferring prescriptions without permission or shipping medications without their knowledge.
These practices not only harm independent pharmacies but also jeopardize health by disrupting access to necessary medications.
Healthcare consultant Rita Numerof calls the FTC's investigation a "pivotal moment" in reforming the industry to serve patients' best interests.
The Need for Enforcement
The lack of punitive action in cases like the BCBS NC complaint raises concerns about the effectiveness of current enforcement mechanisms. Carl Schmid of the HIV+Hepatitis Policy Institute pointed out, "Without action to improve federal and state regulation, oversight, and enforcement, such discriminatory practices will continue." The BCBS NC case demonstrates that while policy changes can be achieved through advocacy and complaints, there is often little consequence for discriminatory practices.
Counts emphasizes that "PBMs are masters at derailing legislative attempts to rein them in." He argues that FTC enforcement is critical, as PBMs often ignore laws unless compelled to comply. Counts asserts that attacking the problem from multiple fronts is essential, and FTC action provides immediate and targeted intervention.
PBM Response and Industry Perspective
In response to mounting scrutiny, PBM executives have defended their practices. During the July 2024 Congressional hearing, leaders from CVS Caremark, Express Scripts, and OptumRx maintained that they do not engage in patient steering or discriminatory practices. They argued that PBMs play a crucial role in negotiating lower drug prices and improving healthcare affordability.
David Joyner, president of CVS Caremark, stated, "We're making health care more affordable and accessible for the millions of people we serve every day."
However, these assertions have been met with skepticism. The House Committee on Oversight and Accountability, led by Chairman James Comer (R-Ky.), has accused PBM executives of making statements that contradict findings about self-benefitting practices.
Legislative Efforts: The Pharmacists Fight Back Act
In addition to regulatory actions by the FTC, legislative initiatives are crucial for comprehensive reform. The Pharmacists Fight Back Act (H.R. 9096), introduced by Representatives Jake Auchincloss (D-MA) and Diana Harshbarger (R-TN), aims to:
Establish Standard Pharmacy Reimbursement:
Proposes a reimbursement model based on the National Average Drug Acquisition Cost (NADAC) plus a state dispensing fee and an additional 2%. This model prevents underpayment to independent pharmacies and curbs price gouging by PBM-owned pharmacies.
Prohibit Predatory PBM Tactics:
Seeks to ban practices such as steering patients to PBM-owned pharmacies, exclusionary network designs, retroactive fees, spread pricing, and reimbursement clawbacks.
Mandate Rebate Transparency and Application:
Requires that 80% of all PBM-negotiated rebates and fees reduce patients' out-of-pocket costs, with the remaining 20% lowering insurance premiums.
Counts stresses the urgency of passing this legislation to save pharmacies and reduce drug pricing: "Its immediate passage is critical to stopping the pharmacy closure and drug pricing crisis in this country."
Potential Outcomes and Industry Impact
If successful, the FTC's action could reshape the pharmaceutical industry by forcing PBMs to prioritize lower net drug prices, benefiting patients with more affordable medications and increased pharmacy choice. A ruling against PBMs could set a legal precedent, opening the door for further regulatory action or private lawsuits against PBMs and other healthcare intermediaries.
Independent pharmacies stand to benefit considerably from potential reforms. If the FTC's action results in more transparent pricing practices and limitations on patient steering, these businesses may be better able to compete with PBM-owned pharmacies.
However, given PBMs' significant resources and influence, changes may be hard-fought and take time to implement. There is the possibility that PBMs may find new ways to maintain their market position and profitability.
Impact on Independent Pharmacies
Independent pharmacies are closing at an alarming rate—nine per day, with 2,275 closures so far in 2024. This trend reduces access to personalized care and diminishes competition, further consolidating PBMs' market power.
Counts conducted a study in Virginia, matching pharmacy closures against openings using data from the Virginia Board of Pharmacy. He found that "community pharmacies are closing at twice the rate they are opening, and this rate is accelerating." Without significant reform, including FTC enforcement and the passage of H.R. 9096, the pharmacy infrastructure in the United States will continue to erode.
Conclusion and Call to Action
The FTC's actions, along with legislative efforts like the Pharmacists Fight Back Act, are critical steps toward creating a fairer pharmaceutical industry that prioritizes access and affordability.
We urge readers to:
Stay Informed: Follow developments in PBM regulation and reform efforts.
Research Legislation: Contact your representatives to inquire about pending legislation.
Engage with Advocacy Groups: Support organizations like PUTT (www.truthrx.org) and the HIV+Hepatitis Policy Institute (www.hivhep.org).
Share Experiences: Raise awareness by sharing your experiences with PBM practices. PUTT is collecting stories to highlight the real-world impact of PBM practices. Visit their PBM Horror Stories page to share your story anonymously.
Collective action is essential to ensure meaningful and lasting change in drug pricing and access. The FTC's action is a significant step, but it's up to all of us to ensure this momentum leads to a more transparent, equitable, and patient-centered healthcare system in the United States.