Would / Should Express Scripts Overpay For Wellpoint’s PBM?

This was a question I was asked yesterday.  If you assume the final bidders come down to Express Scripts and Medco, would Express Scripts overpay for Wellpoint?

  • Strategically, this would be an important acquisition for them.  They lost Caremark to CVS.  Losing Wellpoint to Medco would make them a distant third.
  • Financially, they run a very smart company.  George Paz (CEO and ex-CFO) would be unlikely to pay more for an acquisition than he thought it was worth financially.  Which is a good thing for shareholders.
  • The questions of course that the due diligence team would be asking is what costs can be cut and when.   Is there slack in the current operations or does this address capacity needs?  Are there economies of scale?  And, as I talked about the other day, what is the lock-in on lives?

It will be interesting to see, but it is a hot topic of discussion these days.

2 Responses to “Would / Should Express Scripts Overpay For Wellpoint’s PBM?”


    When I saw the quote (see below) from the Cigna CFO that the Express Script – Wellpoint Deal caught his attention and that Cigna was “open” to a deal, I knew he was going to get flak for this because it signaled to the FTC that the floodgates would be open if it approved the ESRX-WLP deal.
    “In light of Wellpoint’s recent announcement with Express Scripts, we are open to looking at strategic alternatives,” Cigna CFO Mike Bell said in response to a question at a Bank of America conference, which was broadcast over the Internet.
    The main benefit of owning the pharmacy benefit business, Bell said, relates to Cigna’s ability to offer customers integrated clinical information that can improve health of their members, such as data about whether they are staying on their medications.
    However, he noted, “The price tag of the Wellpoint acquisition certainly got a lot of people’s attention, certainly ourselves included.”
    May 13, 2009

    And sure enough he resigned 13 days later
    May 26, 2009

    NEW YORK, May 26 (Reuters) – Cigna Corp (CI.N) Chief Financial Officer Mike Bell is leaving his post, effective immediately, after 25 years at the health insurer, the company said on Tuesday.

    In a securities filing, Cigna said: “There was no disagreement or dispute with the company surrounding Mr. Bell’s resignation.”

  2. See my analysis at

    Click to access The_Express_Scripts_Wellpoint_PBM_Deal.pdf

    BTW: Is it a coincidence or not that Tim Dickman, CEO of Prime resigned 10 days after the Express Script – Wellpoint PBM Deal?

    I believe that the deal is anti-competitive as reasoned in the above paper and the FTC will issue a second request for info.

    Prime would have been a better fit for Wellpoint, but I knew that didn’t have access to the capital markets that Express Scripts has.

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