Icahn urges Cigna shareholders to vote against Express Scripts deal

Updated: Tue, Aug 07, 2018
10:45 pm
Reuters
RELATED NEWS
Czech defence minister to attend Aero India in Bengaluru: PM Andrej Babis Czech defence minister to attend Aero India in Bengaluru: PM Andrej Babis
NABARD estimates Rs 75,612 crore credit potential for Odisha NABARD estimates Rs 75,612 crore credit potential for Odisha
Trade deal could very well happen with China, says Trump Trade deal could very well happen with China, says Trump
GM warns workers in Brazil on losses, tough turnaround plan GM warns workers in Brazil on losses, tough turnaround plan
CM unveils TN start-up policy, focus on 1 lakh new jobs CM unveils TN start-up policy, focus on 1 lakh new jobs

Activist investor Carl Icahn on Tuesday urged Cigna Corp shareholders to vote against the health insurer`s $52 billion purchase of Express Scripts Holding Co, citing regulatory hurdles and the growing threat of Amazon.

The Cigna-Express Scripts deal has drawn investor skepticism over concerns that Amazon.com Inc`s entry into healthcare will upend the sector at a time when President Donald Trump has made a push to lower drug prices.

The Trump administration has proposed a rule that will scale back protections currently in place that allow rebates between drug manufacturers and insurers and pharmacy benefits managers (PBMs).

Icahn said the proposed rule, which came after the Cigna-Express Scripts deal agreement, is a clear shot across the bow for the PBM industry.

"We believe this is the start of a concentrated effort to reform drug pricing and eliminate the highly flawed rebate system," Icahn wrote in a letter to Cigna shareholders, adding that the industry will likely move to an entirely fee-based model over time.

Icahn also highlighted the rising threat of Amazon, which in June bought small online pharmacy PillPack, putting the world`s biggest online retailer in direct competition with drugstore chains, drug distributors and PBMs.

"When Amazon starts to compete as we believe they will, with their 100 million Prime users and scale distribution system, they will have no trouble breaking into the so-called ecosystem," Icahn said.

The billionaire investor, who has a long position on Cigna and a short position on Express Scripts, said in the letter titled "Cigna`s $60 billion folly https://carlicahn.com/open-letter-to-cigna-stockholders" that the insurer was overpaying for Express Scripts.

Icahn said Cigna should instead repurchase its shares and pursue partnership with existing pharmacy benefit managers, including Express Scripts.

Icahn owns 1.36 million shares, representing about 0.56 percent of the outstanding shares of Cigna.

Express Scripts` shares fell last week after the news of Icahn`s stake and his opposition to the deal first emerged. Cigna on Thursday said it was confident of winning shareholder approval for its Express Scripts deal. The shareholder vote is due on Aug. 24.

Express Scripts` shares rose 1.7 percent early Tuesday afternoon, and Cigna shares were up 1 percent.

"We believe we are well positioned for growth and remain confident in the deal," Express Scripts spokesman Brian Henry said. Cigna was not immediately available for comment.

Analysts do not expect shareholders to support Icahn, noting that few shareholders have questioned the strategic rationale of the deal.

Leerink analyst Ana Gupte said a majority of current shareholders are likely to vote in favor of the deal, given a large shareholder overlap between the two companies.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

By continuing to use the site, you agree to the use of cookies. You can find out more by clicking this link

Close