DOJ approves $69B CVS Health-Aetna merger, with conditions

Logos of CVS and Aetna are displayed on a monitor above the floor of the New York Stock Exchange shortly after the opening bell in New York

CVS, a drugstore and retail chain, and insurer Aetna unveiled their merger in December 2017, part of a wave of health transactions aimed at controlling costs in the morass-like United States health system of public and private programs that is comprised of myriad hospitals, insurers, gatekeepers and drug companies.

As part of the approval process, the DOJ set forth the condition that Aetna had to divest itself from its Medicare Part D drug plan, which it eventually sold to WellCare Health Plans for an undisclosed amount late last month. "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", said Makan Delrahim, the head of DOJ's antitrust division, in a statement Wednesday.

It is the second large recent healthcare deal to win a thumbs up from the US Justice Department.

The combination would create a giant with a hand in insurance, prescription drug benefits and drugstores across the U.S. By bringing those businesses under one roof, the companies are betting they'll be better positioned to face changing consumer habits and the emergence of new rivals. Walgreens holds a 26 percent stake in drug distributor AmerisourceBergen Corp., which helps supply Walgreens stores, and last winter the companies held early discussions about a merger, according to reports at the time. Federal antitrust enforcers have not successfully blocked a vertical merger in decades.

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

CVS was up 9% this year and Aetna was higher by 14%.

CVS Chief Executive Officer Larry Merlo outlined his vision for the combined Company in a September 20 speech - a new data-driven health-care model that's more personal, convenient and tailored to individual patients than ever before.

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"Our focus will be at the local and community level, taking advantage of our thousands of locations and touchpoints throughout the country to intervene with consumers to help predict and prevent potential health problems before they occur", Merlo said.

Still, some healthcare providers and antitrust experts have opposed the deal.

"There is every indication that extensive vertical integration resulting from the proposed merger would raise prices, reduce choice and stifle innovation in markets for PBM services, health insurance, retail pharmacy and specialty pharmacy", AMA President Dr. Barbara McAneny said.

This year, the DOJ did not stand in the way of Cigna's takeover of Express Scripts. Under the proposed settlement, Aetna must also assist WellCare in operating the business during the transition and in transferring the affected customers.

The CVS merger could lead to a future in which the company coordinates transportation for patients who have difficulty showing up for routine medical appointments, Aetna chief executive Mark Bertolini has said.

Livingston writes for Crain's sister publication Modern Healthcare.

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