CVS and Aetna Merger
In December 2017 CVS Health announced that it would be acquiring the health insurance company Aetna in a colossal deal worth $69 billion. This merger of a PBM and an insurance company could reshape the health care industry, and poses a grave danger to consumers and competition. Past mergers have led to higher premiums and drug prices, higher health care costs, and worse quality of care.
Consumer groups, healthcare providers, elected officials, and other stakeholders all opposed the merger on the grounds that it will harm consumer choice and competition in the health care industry.
On October 10th, 2018, the Department of Justice approved the merger, on the condition that Aetna sold off its Medicare Part D plans.
On November 28th, the merger officially closed, after gaining approval from the California Department of Managed Health Care and the New York Department of Financial Services. However, Judge Richard Leon was offended at DOJ's approval of the merger without a more thorough investigation, and has ordered that an additional hearing be held on the merger on December 18th. At the hearing, he required CVS and Aetna to keep many of their operations separate while he reviewed the transaction, and criticized the Department of Justice for being dismissive of the Court's rule. Consumer groups submitted comments opposing the merger.
On February 13th, 2019, the Department of Justice posted a response to comments from concerned groups. DOJ dismissed their concerns and claimed that the merger would not harm competition or consumers.
From June 4th-5th, Judge Richard Leon heard from witnesses in support and opposition of the CVS-Aetna merger.
On June 21, 2019, Consumer Action and U.S. PIRG filed another brief opposing the proposed final judgment and arguing that it will not protect consumers or restore competition in the affected markets.
On July 12th, 2019, Consumer Action and U.S. PIRG submitted a response to a letter sent by Gary Loeber, Vice President of CVS, arguing that CVS's acquisition of Aetna will increase its bargaining leverage and hurt consumers through higher prices.
On September 4, 2019, Judge Leon approved the merger.
Consumer groups, healthcare providers, elected officials, and other stakeholders all opposed the merger on the grounds that it will harm consumer choice and competition in the health care industry.
On October 10th, 2018, the Department of Justice approved the merger, on the condition that Aetna sold off its Medicare Part D plans.
On November 28th, the merger officially closed, after gaining approval from the California Department of Managed Health Care and the New York Department of Financial Services. However, Judge Richard Leon was offended at DOJ's approval of the merger without a more thorough investigation, and has ordered that an additional hearing be held on the merger on December 18th. At the hearing, he required CVS and Aetna to keep many of their operations separate while he reviewed the transaction, and criticized the Department of Justice for being dismissive of the Court's rule. Consumer groups submitted comments opposing the merger.
On February 13th, 2019, the Department of Justice posted a response to comments from concerned groups. DOJ dismissed their concerns and claimed that the merger would not harm competition or consumers.
From June 4th-5th, Judge Richard Leon heard from witnesses in support and opposition of the CVS-Aetna merger.
On June 21, 2019, Consumer Action and U.S. PIRG filed another brief opposing the proposed final judgment and arguing that it will not protect consumers or restore competition in the affected markets.
On July 12th, 2019, Consumer Action and U.S. PIRG submitted a response to a letter sent by Gary Loeber, Vice President of CVS, arguing that CVS's acquisition of Aetna will increase its bargaining leverage and hurt consumers through higher prices.
On September 4, 2019, Judge Leon approved the merger.
Letters, Statements, and Testimony Opposing the Merger
Comments by David Balto and Andre Barlow Submitted on Behalf of Consumer Reports, U.S. PIRG, Consumer Action, and the Universal Healthcare Foundation of Connecticut to the Department of Justice, Opposing the CVS and Aetna Merger
"We urge the Court to very carefully review the PFJ. The PFJ needs to be as thorough as possible to prevent post-merger harm. We believe it falls far short of what is needed to effectively preserve competition and prevent consumer harm. The DOJ is taking a significant risk when it accepts remedies to resolve competition concerns posed by mergers and the Court must be confident that the proposed remedies are actually sufficient to prevent these harms from occurring. The remedies must ensure that healthcare markets remain competitive. History suggests that restoring competition is especially difficult in the health insurance industry. It is far from certain that any divestitures required of these merging parties will succeed today, given that they have so clearly failed in the past. Seniors are especially likely to lose out, but the harms will sweep far more broadly. The PFJ is not in the public interest because it will not preserve competition in the individual Medicare Part D PDP markets and does nothing to resolve the many harms that would predictably result from the vertical integration."
Testimony from David Balto and Andre Barlow on Behalf of Consumer Action Before the New York Department of Financial Services, Opposing the CVS and Aetna Merger
"CVS and Aetna already hold significant market power in the retail pharmacy, PBM, and health insurance markets. Given the structure of these markets, a merged CVS-Aetna will increase its bargaining leverage over its rival retail pharmacies and have an enhanced incentive and ability to disadvantage them. The role of community and independent pharmacies is vitally important to competition and patient choice because pharmacists have daily interactions with patients. Competition and patients will likely suffer through higher prices, lower quality, less innovation, and less choice unless state regulators fill the void and regulate the merging parties and the PBM industry going forward."
Comments from David Balto and Andre Barlow on Behalf of Consumer Action and U.S. PIRG Before the United States District Court of the District of Columbia, Opposing the Proposed Final Judgement As Insufficient to Protect Competition and Consumers
"Based on the hearings, there is clear evidence that the proposed divestiture will not fully restore competition. Not only does the divestiture fail to resolve the competitive concerns identified in the DOJ’s Complaint, but it also fails to address how this merger will exacerbate conflicts of interest and self-dealing in the prescription drug supply chain. Therefore, the PFJ should be rejected."
Comments from the American Antitrust Institute, Opposing the CVS/Aetna Merger
"AAI requests that the Antitrust Division withdraw and revise the consent agreement to address the vertical concerns raised by the transaction. Barring withdrawal, AAI requests in the alternative that the Antitrust Division publicly explain the basis for its apparent conclusion that a vertical remedy is unnecessary to prevent the multiplicity of anticompetitive harms raised in the AAI Letter and to preserve competition in the market for the sale of individual Medicare Part D prescription drug plans (“individual PDPs”), which is the focus of the complaint."
Testimony from Dana Mendelsohn of Consumers Union, Expressing Concerns About the Merger
"If this merger is finalized, consumers need assurances that the newly combined CVS-Aetna corporation will lift up consumer interests and improve their lot—on access, affordability, and quality—rather than leaving consumers carrying the weight of this deal."
Letter from California Insurance Commissioner Dave Jones, Urging DOJ to Block the CVS/Aetna Merger
"The proposed CVS-Aetna merger would combine the country’s third largest health insurer by market value with one of the country’s largest PBM / pharmacy chains at a time when the national market for PBM services is already highly concentrated. In addition to removing Aetna as an important potential competitor from the PBM marketplace, the enhanced market power of a merged CVS and Aetna will have an anticompetitive effect on both California’s PBM and health insurance markets, as well as an anticompetitive impact on the retail pharmacy market. The combined entity will also be able to increase barriers to other entities seeking entry into the PBM market, increase costs, decrease the quality of care provided to its members, and reduce competition in the retail pharmacy market...I conclude that the proposed merger of CVS and Aetna is anti-competitive and recommend that the United States Department of Justice challenge this transaction."
Letter from Senator Chuck Grassley (R-IA) Expressing Concerns About the Merger
"I write to urge the Department of Justice to conduct a robust analysis of the proposed mergers of Cigna Corp. with Express Scripts Holding Co. and CVS Health Corp. with Aetna Inc. According to a new report from the Kaiser Family Foundation, if approved, the two combined entities, along with UnitedHealth and Humana, would cover 71% of all Medicare Part D enrollees and 86% of stand-alone drug plan enrollees...It is imperative that the Antitrust Division conduct a careful analysis of these proposed transactions to ensure that competitive markets in the pharmaceutical supply chain are not impacted adversely."
Letter from American Medical Association to Department of Justice, Opposing the Merger
"After very carefully considering this merger over the past months, the AMA has come to the conclusion that this merger would likely substantially lessen competition in many health care markets, to the detriment of patients. Accordingly, based on the mutually confirming analyses and conclusions presented by the nationally recognized experts and other experts, as well as extensive research, the AMA is now convinced that the proposed CVS-Aetna merger should be blocked."
Testimony from Connecticut Pharmacists Association, Opposing the Merger
"As the healthcare system continues to consolidate, healthcare costs continue to increase, and patients have fewer choices. The Department should be concerned with this trend.
We encourage the Department to work closely with the Office of the Healthcare Advocate and the Governor's Healthcare Cabinet to protect consumers from the consequences, both intended and unintended, of this mega-merger."
Letter from Association of American Physicians and Surgeons
"CVS has demonstrated a pattern of anticompetitive behavior. Allowing this merger to proceed will hand the combined CVS/Aetna even more clout to drive up costs without any corresponding benefit to patients. It would enable, not hinder, continued anticompetitive tactics that squeeze competitors out of business and steer patients toward CVS/Aetna-controlled products, away from
alternate sources of care like their trusted independent pharmacists, pharmacies, and physicians."
Testimony of Professor Lawton R. Burns, PhD, MBA, on Merger
"The specific benefits of the merger espoused by company executives are unlikely to be achieved. The numerous benefits cited lack any documentation and are contradicted by the research evidence. Many of these benefits rely on retail pharmacies and in-store health clinics to “transform” healthcare and serve as a healthcare hub for consumers. For a multitude of reasons, such outcomes are unlikely. In fact, pharmacy-based retail clinics are unlikely to improve quality, improve health outcomes, or reduce cost of care. I conclude that there are no apparent benefits from the proposed merger that compensate for welfare losses stemming from antitrust concerns."
"We urge the Court to very carefully review the PFJ. The PFJ needs to be as thorough as possible to prevent post-merger harm. We believe it falls far short of what is needed to effectively preserve competition and prevent consumer harm. The DOJ is taking a significant risk when it accepts remedies to resolve competition concerns posed by mergers and the Court must be confident that the proposed remedies are actually sufficient to prevent these harms from occurring. The remedies must ensure that healthcare markets remain competitive. History suggests that restoring competition is especially difficult in the health insurance industry. It is far from certain that any divestitures required of these merging parties will succeed today, given that they have so clearly failed in the past. Seniors are especially likely to lose out, but the harms will sweep far more broadly. The PFJ is not in the public interest because it will not preserve competition in the individual Medicare Part D PDP markets and does nothing to resolve the many harms that would predictably result from the vertical integration."
Testimony from David Balto and Andre Barlow on Behalf of Consumer Action Before the New York Department of Financial Services, Opposing the CVS and Aetna Merger
"CVS and Aetna already hold significant market power in the retail pharmacy, PBM, and health insurance markets. Given the structure of these markets, a merged CVS-Aetna will increase its bargaining leverage over its rival retail pharmacies and have an enhanced incentive and ability to disadvantage them. The role of community and independent pharmacies is vitally important to competition and patient choice because pharmacists have daily interactions with patients. Competition and patients will likely suffer through higher prices, lower quality, less innovation, and less choice unless state regulators fill the void and regulate the merging parties and the PBM industry going forward."
Comments from David Balto and Andre Barlow on Behalf of Consumer Action and U.S. PIRG Before the United States District Court of the District of Columbia, Opposing the Proposed Final Judgement As Insufficient to Protect Competition and Consumers
"Based on the hearings, there is clear evidence that the proposed divestiture will not fully restore competition. Not only does the divestiture fail to resolve the competitive concerns identified in the DOJ’s Complaint, but it also fails to address how this merger will exacerbate conflicts of interest and self-dealing in the prescription drug supply chain. Therefore, the PFJ should be rejected."
Comments from the American Antitrust Institute, Opposing the CVS/Aetna Merger
"AAI requests that the Antitrust Division withdraw and revise the consent agreement to address the vertical concerns raised by the transaction. Barring withdrawal, AAI requests in the alternative that the Antitrust Division publicly explain the basis for its apparent conclusion that a vertical remedy is unnecessary to prevent the multiplicity of anticompetitive harms raised in the AAI Letter and to preserve competition in the market for the sale of individual Medicare Part D prescription drug plans (“individual PDPs”), which is the focus of the complaint."
Testimony from Dana Mendelsohn of Consumers Union, Expressing Concerns About the Merger
"If this merger is finalized, consumers need assurances that the newly combined CVS-Aetna corporation will lift up consumer interests and improve their lot—on access, affordability, and quality—rather than leaving consumers carrying the weight of this deal."
Letter from California Insurance Commissioner Dave Jones, Urging DOJ to Block the CVS/Aetna Merger
"The proposed CVS-Aetna merger would combine the country’s third largest health insurer by market value with one of the country’s largest PBM / pharmacy chains at a time when the national market for PBM services is already highly concentrated. In addition to removing Aetna as an important potential competitor from the PBM marketplace, the enhanced market power of a merged CVS and Aetna will have an anticompetitive effect on both California’s PBM and health insurance markets, as well as an anticompetitive impact on the retail pharmacy market. The combined entity will also be able to increase barriers to other entities seeking entry into the PBM market, increase costs, decrease the quality of care provided to its members, and reduce competition in the retail pharmacy market...I conclude that the proposed merger of CVS and Aetna is anti-competitive and recommend that the United States Department of Justice challenge this transaction."
Letter from Senator Chuck Grassley (R-IA) Expressing Concerns About the Merger
"I write to urge the Department of Justice to conduct a robust analysis of the proposed mergers of Cigna Corp. with Express Scripts Holding Co. and CVS Health Corp. with Aetna Inc. According to a new report from the Kaiser Family Foundation, if approved, the two combined entities, along with UnitedHealth and Humana, would cover 71% of all Medicare Part D enrollees and 86% of stand-alone drug plan enrollees...It is imperative that the Antitrust Division conduct a careful analysis of these proposed transactions to ensure that competitive markets in the pharmaceutical supply chain are not impacted adversely."
Letter from American Medical Association to Department of Justice, Opposing the Merger
"After very carefully considering this merger over the past months, the AMA has come to the conclusion that this merger would likely substantially lessen competition in many health care markets, to the detriment of patients. Accordingly, based on the mutually confirming analyses and conclusions presented by the nationally recognized experts and other experts, as well as extensive research, the AMA is now convinced that the proposed CVS-Aetna merger should be blocked."
Testimony from Connecticut Pharmacists Association, Opposing the Merger
"As the healthcare system continues to consolidate, healthcare costs continue to increase, and patients have fewer choices. The Department should be concerned with this trend.
We encourage the Department to work closely with the Office of the Healthcare Advocate and the Governor's Healthcare Cabinet to protect consumers from the consequences, both intended and unintended, of this mega-merger."
Letter from Association of American Physicians and Surgeons
"CVS has demonstrated a pattern of anticompetitive behavior. Allowing this merger to proceed will hand the combined CVS/Aetna even more clout to drive up costs without any corresponding benefit to patients. It would enable, not hinder, continued anticompetitive tactics that squeeze competitors out of business and steer patients toward CVS/Aetna-controlled products, away from
alternate sources of care like their trusted independent pharmacists, pharmacies, and physicians."
Testimony of Professor Lawton R. Burns, PhD, MBA, on Merger
"The specific benefits of the merger espoused by company executives are unlikely to be achieved. The numerous benefits cited lack any documentation and are contradicted by the research evidence. Many of these benefits rely on retail pharmacies and in-store health clinics to “transform” healthcare and serve as a healthcare hub for consumers. For a multitude of reasons, such outcomes are unlikely. In fact, pharmacy-based retail clinics are unlikely to improve quality, improve health outcomes, or reduce cost of care. I conclude that there are no apparent benefits from the proposed merger that compensate for welfare losses stemming from antitrust concerns."