CVS Health and Aetna $69 Billion Merger Is Approved With Conditions
The Justice Department’s approval of the $69 billion mergers
between CVS Health and Aetna on Wednesday caps a wave of consolidation among giant health
care players that would leave American consumers with less control over their
medical aid and prescribed drugs.
The approval marks the close of an era, during which
powerful pharmacy benefit managers brokered drug prices among pharmaceutical companies,
insurers, and employers.
But a combined CVS-Aetna could also be even more formidable.
As the last major free-standing pharmacy manager, CVS Health had revenues of about $185 billion last year and provided prescription plans to roughly 94 million customers.
As the last major free-standing pharmacy manager, CVS Health had revenues of about $185 billion last year and provided prescription plans to roughly 94 million customers.
Aetna, one of the nation’s largest insurers with about $60 billion in revenue last year, covers 22 million people in its health plans.
The two companies say that they're going to be better ready
to coordinate look after consumers because of the mergers help tighten cost controls.
Larry J. Merlo, the chief executive of CVS Health, said in a statement that the approval “is a crucial step toward bringing together the strengths and capabilities of our two companies to enhance the buyer health care experience.”
Larry J. Merlo, the chief executive of CVS Health, said in a statement that the approval “is a crucial step toward bringing together the strengths and capabilities of our two companies to enhance the buyer health care experience.”
But critics worry that buyers could find themselves with far
fewer options and better expenses.
Just last month, the Justice Department also approved the takeover of Express Scripts, a major CVS rival, by the big insurer Cigna.
“This sort of consolidation during a market already
dominated by a couple of, powerful players presents the very real possibility of reduced competition
that harms consumer choice and quality,” George Slover, senior policy counsel for Consumers
Union, an advocacy group, said in a statement.
The consumer organization had opposed the Aetna-CVS merger,
arguing that folks enrolled in Aetna health plans might be forced to hunt care
at CVS retail clinics and that those who weren't insured by Aetna could pay higher prices
for drugs than those that were.
“The combination of CVS and Aetna creates a huge market the force that we haven’t seen before,” Mr. Slover said.
The Justice Department had undertaken an antitrust review of
these types of deals, approving many because they involve distinct businesses.
It granted conditional approval to the CVS-Aetna deal as long as Aetna sold off its private Medicare drug plans.
It granted conditional approval to the CVS-Aetna deal as long as Aetna sold off its private Medicare drug plans.
Amid the growing outcry over the high price of medicines,
pharmacy managers have been vilified alongside big drug makers.
Critics say pharmacy managers’ secretive deals — under which price-setting strategies are not publicly disclosed — enrich companies on all sides of the prescription pipeline while failing to profit consumers.
Critics say pharmacy managers’ secretive deals — under which price-setting strategies are not publicly disclosed — enrich companies on all sides of the prescription pipeline while failing to profit consumers.
In addition to the 2 major entities now attached to powerful
insurance companies, OptumRx, another major pharmacy manager, is owned by
UnitedHealth Group.
Anthem, which operates for-profit Blue Cross plans in several states is developing its own in-house pharmacy operation.
Anthem, which operates for-profit Blue Cross plans in several states is developing its own in-house pharmacy operation.
“There are going to be mammoth organizations,” said Adam J.
Fein, the chief executive of Drug Channels Institute, a research firm.
Now that generic drugs account for about 90 percent of all
prescriptions, the role of pharmacy benefit managers referred to as P.B.M.’s, has
changed over time, with higher drug prices largely a product of the rise of inexpensive specialty
medicines for conditions like rheumatoid arthritis or cancer.
“The job of the P.B.M. is being transformed,” Mr. Fein said.
Facing the prospect of competition from outsiders like
Amazon, whose tentative forays into the pharmacy business have already surprised the industry,
established players have also been looking for ways to stay relevant to their customers
and enlarge their share of the health care market.
The companies “are feeling pressure to try to do something
different or it'll be done to them,” said Brian Marcotte, the chief executive of the National
Business Group on Health, which represents large employers.
Some employers are actively looking for alternatives to the
status quo.
This year, Amazon, JPMorgan Chase, and Berkshire Hathaway announced plans to form a new company to address the high costs and frustrations that their employees must contend with as they navigate the existing system.
This year, Amazon, JPMorgan Chase, and Berkshire Hathaway announced plans to form a new company to address the high costs and frustrations that their employees must contend with as they navigate the existing system.
“It’s a disruptive period of time when the players are
rearranging themselves,” said David W. Johnson, the chief executive of 4sight Health, a consultant.
Five state attorneys general — from California, Florida,
Hawaii, Mississippi, and Washington — joined with the Justice Department in conditionally
approving the Aetna-CVS deal.
The merger is expected to be finalized sometime before the end of the year.
The merger is expected to be finalized sometime before the end of the year.
The preliminary approval was based on Aetna’s decision to
sell its plans to WellCare Health Plans to deal with the government’s concerns that the
combined companies would control too much of the market.
But state regulators and consumer groups have also raised other concerns about the impact of the merger, saying that the shortage of huge pharmacy managers that aren’t affiliated with insurers could make it difficult for smaller competitors in either sector.
But state regulators and consumer groups have also raised other concerns about the impact of the merger, saying that the shortage of huge pharmacy managers that aren’t affiliated with insurers could make it difficult for smaller competitors in either sector.
Previous mergers within the industry have left consumers
with fewer choices and better drug bills, said David A. Balto, an antitrust lawyer who is a critic of the pharmacy managers.
“This is a marketplace that hasn’t done well because of a
lack of transparency and transparency may be even weaker,” said Mr. Balto, who had
worked at the Federal Trade Commission and the Justice Department.
Affiliations with large insurers could change that dynamic,
he added. “It might correct a number of the more pernicious practices.”
Mr. Balto warned that while state officials have not
traditionally overseen pharmacy managers, the combined mammoths “could bring them into the
crosshairs of regulation.”
The mergers also show how far organizations are crossing the
traditional line between insurance companies responsible for paying for care and
providers responsible for delivering it.
There have always been organizations that perform both
functions, but the lines have been increasingly blurred.
UnitedHealth, for example, has been aggressively buying physician practices and surgery centers, while Humana announced plans to become the nation’s largest provider of hospice care.
UnitedHealth, for example, has been aggressively buying physician practices and surgery centers, while Humana announced plans to become the nation’s largest provider of hospice care.
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