U.S. health insurer Cigna is in talks to merge with Humana in a deal that could exceed $60 billion in value. The merger could rival UnitedHealth Group and CVS Health in size, according to a Reuters source. However, overlapping pharmacy benefits management and other businesses could kill the deal.

Humana is the second largest payer for Medicare Advantage and services many government health plans. Cigna is #15 on Fortune 500, and reportedly had $180 billion in revenue last year, making it one of the most profitable companies worldwide.

While Reuters previously reported that Cigna was planning to sell its stagnating MA business. and Humana is exiting the employer market and bolstering home health and primary care to serve its government business, some experts say antitrust concerns would likely still emerge from a Cigna-Humana merger.

"If you are going to try to prepare to be a better match with Humana from a regulatory standpoint, them dropping MA would make it a lot easier," Craig Garthwaite, a healthcare economist at Northwestern University, told Reuters.

Pharmacy overlap could prevent a merger

Still, several others have pointed out that overlapping PBM businesses will surely raise regulators' hackles. Louisville-based Humana manages drug benefits for Medicare, and Cigna owns PBM giant Express Scripts, which it purchased in 2018.

Congress is also looking at PBM reform to prevent tactics that raise drug costs.

Wendell Porter, who once managed communications around mergers and acquisitions for the Bloomfield, Indiana-based payvider, said that the rumors do "indicate that Cigna sees such a deal as a strategic priority." 

Tuesday, he said on his blog that "another reason to believe there is something to the speculation is the fact that Humana last month announced it had hired former UnitedHealth executive Jim Rechtin as chief operating officer and CEO-in-waiting" to succeed soon-to-be-retiring CEO Bruce Broussard. 

Porter noted that Humana highlighted Rechtin's "depth of experience in healthcare mergers and the overall healthcare sector" while at Bain & Company in that announcement.

After the federal government did not approve either Aetna's proposal to buy Humana and Anthem's Cigna deal in 2017, speculators put a Cigna-Humana merger on the horizon.

"Through the use of technology and integrated services to simplify the consumer experience, the combined entity will be even more effective in meeting the health needs of many more people especially people with chronic conditions, who will benefit from Humana's home health, pharmacy management and data analytics programs," Broussard said in 2015 when the Aetna deal was proposed.

Cigna reportedly wanted out of its deal with Anthem while the government considered the merger, and both companies ended up suing each other for damages from the failed merger, which neither won. Some Cigna investors also sued Cigna.

Andrea Fox is senior editor of Healthcare IT News.
Email: afox@himss.org
Healthcare IT News is a HIMSS Media publication.