Monday, 17 December, 2018

CVS, Aetna win United States approval for $69 billion merger

Health Care ETFs Retreat on DOJ Approval of Aetna-CVS Merger DOJ approves $69B CVS Health-Aetna merger, with conditions
Celia Hoffman | 13 October, 2018, 02:59

To get the merger approved, CVS must divest Aetna's Medicare Part D prescription drug plan business for individuals, the DOJ said Wednesday. Aetna has already agreed to sell the business to a subsidiary of WellCare.

Together Aetna and CVS have 6.8 million members in standalone Medicare drug plans, the Justice Department said.

With DOJ approval secured for the megamergers of both CVS-Aetna and Cigna-Express Scripts, a major sector of the healthcare industry is under a seismic shift. The deal combines CVS' pharmacies with Aetna's insurance business, blurring traditionally distinct lines in hopes of lowering costs.

"The AMA worked tirelessly to oppose this merger and presented a wealth of expert empirical evidence to convince regulators that the merger would harm patients", said AMA president Barbara McAneny Wednesday in a statement. A recent report by the University of California at Berkeley's Petris Center on Health Care Markets and Consumer Welfare confirms that rapid consolidation of healthcare markets in California has led to rising healthcare costs for consumers throughout the state. By leveraging CVS MinuteClinics and referring patients to less expensive modes of care, together the two will attempt to bend the cost curve.

To help seal US approval for the deal, Aetna last month agreed to sell its Medicare drug plans to WellCare Health Plans Inc., to alleviate concerns that a takeover by CVS would otherwise harm competition among plans that sell pharmaceutical coverage to seniors.

The DOJ said the sale of the Medicare Part D plan was a condition of clearing the deal.

Health Care ETFs Retreat on DOJ Approval of Aetna-CVS Merger 1

The DOJ and five state attorneys general-from California, Florida, Hawaii, Mississippi, and Washington-filed a federal lawsuit Wednesday to block the merger, simultaneously proposing a settlement to resolve the matter. Under the proposed settlement, Aetna will have to help WellCare run the business during the transition and give it the opportunity to hire key employees.

DOJ said that without the settlement, the merger would "cause anticompetitive effects, including increased prices, inferior customer service, and decreased innovation in sixteen Medicare Part D regions covering twenty-two states".

CVS proposed to buy Aetna in late 2017 in a deal that would combine the largest drugstore chain with Aetna's insurance business.

The DOJ recently permitted Cigna's acquisition of pharmacy benefits manager Express Scripts, and CVS's ambitions to expand reflect a changing health care market under pressure from consumers and regulators to lower costs.

An attempt by Aetna to acquire Humana was ultimately blocked a year ago by antitrust regulators. Anthem Inc., whose deal to acquire Cigna Corp. was blocked past year, is another possible acquirer. Jones, however, does not have direct regulatory approval over the deal. The agency gave the green light to health insurer Cigna Corp's (CI.N) $52 billion acquisition of the nation's largest pharmacy benefit manager (PBM), Express Scripts Holding Co (ESRX.O), on September 17. The deal is expected to close at the end of this year.

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