Docs seek to block Aetna, CVS deal

By: Claude Solnik September 7, 2018

Physician groups including the Westbury- based Medical Society of the State of New York have asked the federal government to block CVS Health’s acquisition of Aetna, saying the deal would likely lead to problems for patients.

Woonsocket, Rhode Island,-based CVS, the nation’s largest retail pharmacy chain with 9,700 stores and the second biggest pharmacy benefit manager, is seeking to acquire Hartford, Conn.-based Aetna, the third largest U.S. health insurer.

The deal, valued at $69 billion and $77 billion including Aetna’s debt, would convert Aetna into a stand-alone business unit within CVS Health.

It would add synergies, position the firms to deal with existing competitors and potentially new ones, such as Amazon, which has said it may seek to operate as an online pharmacy.

The firms are pursuing approvals from nearly 30 states’ insurance departments and the U.S. Department of Justice.

But the Medical Society of the State of New York, the American Medical Association, the California Insurance Commissioner and the American Antitrust Institute have asked the U.S. Department of Justice to block the deal.

“The AMA has come to the conclusion that this merger would likely substantially lessen competition in many healthcare markets, to the detriment of patients,” the AMA wrote in a letter to the U.S. Department of Justice’s anti-trust division.

Dr. Thomas Madejski, president of the Medical Society of the State of New York, last week said he agrees with the California commissioner’s conclusion that “permitting these behemoths to merge will ‘create a conglomerate that will be too difficult to regulate and will likely harm patient care.’”

And Dr. Charles Rothberg, an ophthalmologist in Patchogue and the society’s immediate past president, said the merger could reduce access to pharmacies, lower health insurer competition, increase prior authorization hassles and lower the importance of physician-based medical homes.

“Several diverse perspectives have resulted in the same conclusion – that this merger would have an adverse impact on patient access to care,” according to the society.

CVS Health President and CEO Larry Merlo argues the combination would bring together “the expertise of two great companies to remake the consumer health care experience.”

And Aetna Chairman and CEO Mark Bertolini said the combined firm “will better understand our members’ health goals, guide them through the healthcare system and help them achieve their best health.”

Aetna argues its “extensive network of providers” will be able to serve consumers better through CVS’s more than 9,700 pharmacies – including about 1,700 inside Target stores – and 1,100 MinuteClinics.

“The entire healthcare system will also benefit from broader use of data and analytics, leading to improved patient health at substantially lower cost,” according to CVS.

In a statement, the firm said the deal “provides greater integration of care, empowering consumers and their health professionals to make more informed decisions.”

The deal, according to CVS, will result in nearly $750 million in synergies, saving money by bringing insurer, pharmacy benefits manager and pharmacy under one umbrella.

Barclays, Goldman Sachs and Bank of America Merrill Lynch have agreed to provide $49 billion in financing.

The proposal comes as the biggest pharmacy chains seek to expand to cut costs, grow profits and, they say, improve care, while raising issues as to whether the combinations could lessen competition.

Walgreens recently bought more than 1,900 Rite Aid stores for $4.2 billion, growing to nearly 10,000 U.S. locations.

And UnitedHealth merged CatamaranRX, one of the nation’s biggest pharmacy benefit managers, into its benefits management operation, OptumRxbusiness, in a $13 billion deal.

But some deals have collapsed or been blocked: Rite Aid and supermarket chain Albertsons earlier this year scuttled merger plans after some Rite Aid investors and advisors sought a higher price.

Federal regulators blocked some major matches between insurers, such as Aetna/Humana and Cigna/Anthem.

While CVS is a pharmacy chain not an insurer, the two overlap as pharmacy benefits managers, leading opponents to argue the deal could reduce competition in that business.

CVS/Caremark, Express Scripts and UnitedHealth Group’s OptumRX collectively control about 70 percent of the nation’s pharmacy benefit manager business. CVS already serves as pharmacy benefits manager for Aetna’s members.

CVS serves nearly 90 million pharmacy benefit plan members, while Aetna provides benefits to nearly 44.6 million.

If the deal goes through, Express Scripts would be the only pharmacy benefit manager not connected to an insurer.

The deal could reduce competition in the Medicare Part D market, which both firms serve, prompting resistance from physicians.

The AMA concluded that “CVS would significantly reduce the size of the health insurer market available for competing pharmacy benefit managers and pharmacies, including entrants such as Amazon.”

CVS could provide favorable terms to Aetna over other insurers by placing a pharmacy benefits manager and retail chain under its umbrella.

The AMA cites a report issued earlier this year by the President’s Council of Economic Advisers concluding that these firms already “exercise undue market power.”

“Without new entry and competition, pharmacy benefit managers can continue to keep secret the size of manufacturer rebates and the percentage of the rebate passed on to health plans and employers,” according to the AMA.

Northwell Health CEO Michael Dowling points to “large healthcare mergers” including a possible CVS and Aetna combination as potentially changing the healthcare landscape.

He also said companies such as Google, Amazon and IBM Watson’s efforts “to stake out a piece of the healthcare field underscore the ever-evolving nature of the ways people access and pay for care and services.”

Northwell, Dowling said, is “forging new partnerships and pursuing ventures that will enable us to compete more effectively in this rapidly changing environment.”

Northwell, however, closed its insurer CareConnect, after facing large payments that the nonprofit said made its participation as an insurer prohibitively expensive.

“I’m a big believer that competition is good. It’s disrupting,” Dowling said of the need for groups to vie with each other. “It will give you headaches. You’ll have sleepless nights. But it’s good because it forces you to work harder and get better.”

Healthcare isn’t the only industry where recently proposed mergers have faced headwinds and, in some cases, been blocked. The U.S. Department of Justice last year blocked the merger of AT&T and Time Warner.

https://libn.com/2018/09/07/docs-seek-to-block-aetna-cvs-deal/