Department of Justice Approves CVS and Aetna Merger Despite AMA Concerns

Earlier this week the Department of Justice (DOJ) cleared the $69 billion merger between CVS and Aetna, with some conditions.

In order to approve the merger, the DOJ required Aetna to sell off its Medicare Part D business, worth $2.2 million, as CVS already has its own Part D business under its “SilverScript” brand. Antitrust regulators stated that this would “fully resolve the departments anticompetitive concerns,” and, in agreement, Aetna will sell off its Part D business to WellCare.

“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 healthcare services that American consumers can obtain,” said assistant attorney general Makan Delrahim of the Justice Department’s AntiTrust Division in a statement.

Without the divestiture, DOJ attorneys argued that the combined company would have anticompetitive effects, increased prices, and inferior customer service, specifically in the states where Aetna previously sold Part D plans.

“DOJ clearance is an important step toward bringing together the strengths and capabilities of our two companies to improve the consumer healthcare experience. We are pleased to have reached an agreement with the DOJ that maintains the strategic benefits and value creation potential of our combination with Aetna,” said CVS Health president and CEO, Larry J. Merlo in a statement.

However, notable industry members such as the American Medical Association (AMA) and the American Antitrust Institute (AAI) have spoken out against the merger and called for the DOJ to block the transaction prior to its announcement this week.

In June, AMA president Barbara L. McAneny, MD, outlined the group’s concerns during a hearing held by the California Department of Insurance stating that “The AMA has come to the conclusion that this merger would likely substantially lessen competition in many healthcare markets, to the detriment of patients,” and therefore should be blocked.

While part of the AMA’s concern was resolved with the DOJ requirement that Aetna sell off its Part D business, other factors remain such as the anticompetitive effects the merger would have on pharmacy benefit manager (PBM) services, health insurance, retail pharmacy, and specialty pharmacy. AAI echoed these concerns citing its belief that 3 integrated PBM-insurer systems would dominate the marketplace and effectively lock out competition.

Going forward, CVS and Aetna are working to complete the remaining state reviews, and CVS believes the merger is on track to be completed in the early part of this quarter.