Wallerlaw.com
Disclaimer
CVS-Aetna merger receives antitrust approval from Justice Department
Back

CVS-Aetna merger receives antitrust approval from Justice Department

10.11.19

Richard J. Leon, Senior Judge for the United States District Court for the District of Columbia, approved a $70 billion merger between CVS Health Corporation and Aetna Inc. on September 4. This merger, which was initially announced in 2017, will combine the country’s largest pharmacy chain, CVS, with the country’s third-largest health insurer and fourth-largest individual prescription drug plan insurer, Aetna, resulting in what some are calling a healthcare giant.

Critics argue the merger will cause an already dominated and uncompetitive marketplace to become even more so, resulting in antitrust issues and increased rates for medical services. Currently, three pharmacy benefit managers control more than 70 percent of the market, and CVS alone accounts for almost 25 percent of all prescription revenue in the United States.

In the case, District Judge Leon considered whether the merger was a violation of Section 7 of the Clayton Act, 15 U.S.C. § 18, which seeks to prohibit a merger that may significantly reduce competition or create a monopoly. A consent judgment requiring certain actions by CVS and Aetna was considered by the court.

According to Leon’s final judgment, “When the Government seeks to settle a civil antitrust suit through a consent judgment, a court must independently ‘determine that . . . entry of [the proposed] judgment is in the public interest’ before granting the Government’s request.” Thus, the court was left to determine whether the proposed consent judgment was in the public interest.

Although Leon acknowledged that the critics’ concerns were substantial and warranted serious consideration, he found that “CVS and the government’s witnesses, when combined with the existing record, persuasively support why the markets at issue are not only very competitive today but are likely to remain so post-merger.” Leon concluded, “Consequently, the harms to the public interest the critics raised were not sufficiently established to undermine the Government’s conclusion to the contrary.” Ultimately, Judge Leon held that the United States proposed settlement was well “within the reaches” of the public interest and issued a final judgment.

The final judgment calls for, among other items, CVS to divest Aetna’s prescription drug plan business to WellCare Health Plans, Inc., an independently owned competitor, or to another approved company; for CVS, at WellCare’s option, to enter into an administrative services agreement to provide WellCare with the services required to manage the divestiture assets through 2019; and for CVS and Aetna to allow WellCare to use the Aetna brand through 2019 to market the prescription drug plan business.

In response to the recent decision made by the District Court, American Medical Association President Dr. Patrice Harris stated in this article that the court’s decision “fails patients, will likely raise prices, lower quality, reduce choice, and stifle innovation.” Harris further stated, “For patients and employers struggling with recurrent increases to health insurance premiums, out-of-pocket costs, and prescription drug prices, it’s hard to find any upside to a merger that leaves them with fewer choices.”

Adam Garber, a spokesman for U.S. PIRG, a network of consumer groups, stated in this article that CVS “has used its market power to both increase the cost of medications for consumers and rip off the government, instead of passing on savings it promised to consumers. If their past actions are any evidence, this approved merger will leave Americans poorer and sicker. And it will likely encourage other companies to enact similar mega-mergers that will drive up prescription drug costs.”

On the other hand, CVS has invested almost two years trying to finalize this merger with Aetna, which could potentially have been disrupted if the District Judge had not decided in their favor. In response to the district court’s decision, T.J. Crawford, a spokesman for CVS, stated in this article, “CVS Health and Aetna have been one company since November 2018, and today’s action by the district court makes that 100% clear. We remain focused on transforming the consumer health care experience in America.”

Although it is quite clear that there are varying opinions regarding the appropriateness of the recent court decision, the actual impact of this merger has yet to be seen, and ultimately, only time will tell whether this decision will avoid the concerns that many critics have put forward regarding the merging of these two healthcare titans.

Belmont Law student Jacob Freeland contributed to this report.



Recommended Content

n/a
Top of Page