HARTFORD, Conn. and WOONSOCKET, R.I (October 10, 2018)—Aetna, headquartered in Hartford, Connecticut, is the nation’s third-largest health-insurance company and fourth-largest individual prescription drug plan insurer, with over two million prescription drug plan members. In 2017, Aetna earned revenues of approximately $60 billion.
CVS, headquartered in Woonsocket, Rhode Island, operates the nation’s largest retail pharmacy chain, owns a large pharmacy benefit manager called Caremark, and is the nation’s second-largest provider of individual prescription drug plans, with approximately 4.8 million members. In 2017, CVS earned revenues of approximately $185 billion.
As of Oct. 10, 2018, Aetna and CVS will unite with the Department of Justice’s OK. The move is said to mark a major shift in the competitive landscape for health care, and there’s one major catch in coming together.
Because of their stature in retail pharmacy and health insurance, the two are significant competitors in the sale of Medicare Part D prescription drug plans to individuals, together serving 6.8 million members nationwide.
In a proposed settlement the DOJ addressed through public information Oct. 10, 2018, CVS Health Corporation (CVS) and Aetna Inc. (Aetna) will be required to divest Aetna’s Medicare Part D prescription drug plan business for individuals in order to proceed with their $69 billion merger.
The settlement resolves competition concerns posed by the mega health care merger and preserves competition in the sale of Medicare Part D prescription drug plans for individuals, according to the DOJ. Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division said, “The divestitures required here allow for the creation of an integrated pharmacy and health benefits company that has the potential to generate benefits by improving the quality and lowering the costs of the health care services that American consumers can obtain.”
The Department’s Antitrust Division, along with the offices of five state attorneys general, filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to enjoin the proposed transaction, along with a proposed settlement that, if approved by the court, would fully resolve the Department’s competitive concerns. The participating state attorneys general offices represent California, Florida, Hawaii, Mississippi and Washington.
Under the terms of the proposed settlement, Aetna must divest its individual prescription drug plan business to WellCare and allow WellCare the opportunity to hire key employees who currently operate the business. Aetna must also assist WellCare in operating the business during the transition and in transferring the affected customers through a process regulated by the Centers for Medicare and Medicaid Services, an agency within the U.S. Department of Health and Human Services.
On this settlement, any person may submit written comments concerning the proposal within 60 days of its publication to Peter Mucchetti, Chief, Healthcare and Consumer Products Section, Antitrust Division, Department of Justice, 450 Fifth Street NW, Suite 4100, Washington, DC 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.
In November 2017, Benjamin Gomes-Casseres for the Harvard Business Review wrote of the important case law that would be set with the DOJ’s treatment of this vertical merger. “And, in the end,” he wrote, “we consumers will learn if these kinds of mergers, are literally, good for our health."
Opposition to the CVS-Aetna merger has mounted since the event was first announced, with some of the talking points centered around decreased competition, and the merger would not in the best interests of patients. It has been considered troubling in light of the highly-concentrated national market for PBM services and current lack of transparency in drug pricing and PBM contracts, President-elect Marilyn Singleton, MD, JD, stated as part of the Association of American Physicians and Surgeons (AAPS) feedback in late September. The national AAPS, founded in 1943, represents physicians in all specialties.
“Patients win when there is a competitive market with independent pharmacies as well as online pharmacies. Diminishing competition means that patients will see higher insurance premiums, lower quality, and fewer novel insurance products that meet their specific needs,” the AAPS letter noted.
In August 2018, the American Medical Association presented its research on the CVS-Aetna merger, one of its points being that with the acquisition of Aetna, the PBM market would lose a national health insurance company with an established brand, a significant customer base, expertise, capital and years of experience as a major player. Read more of the AMA’s research and position here.
Related >> Reuters' report on the merger
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