August 10, 2018 / 1:49 PM / 4 months ago

Advisory firm ISS backs Cigna's Express Scripts buy

(Reuters) - Shareholder advisory firm Institutional Shareholder Services Inc (ISS) on Friday recommended that Cigna Corp (CI.N) investors vote for the health insurer’s $52 billion purchase of pharmacy benefits manager Express Scripts (ESRX.O), a deal that has been opposed by activist investor Carl Icahn.

ISS, whose recommendations are followed by major mutual funds, said for investors with exposure to both companies the potential benefits outweigh the risks, “especially given that these risks are, to some degree, unavoidable.”

However, the firm noted that the merger presents a more difficult decision for Cigna investors, highlighting the worsening environment for pharmacy benefits managers.

In his latest attack on Thursday, Icahn said drug rebates that pharmacy benefit managers receive from drugmakers will ultimately be eliminated.

PBMs have come under increasing scrutiny in the drug pricing debate, with the Trump administration proposing a rule that would scale back protections in place that allow rebates between drug manufacturers, insurers and PBMs.

Hedge fund Glenview Capital Management on Thursday backed the deal, saying it would strengthen Cigna’s growth prospects.

Reporting by Manas Mishra in Bengaluru; Editing by Sriraj Kalluvila

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