Jan. 10, 2019
The
CVS-Aetna megamerger hit another snag this week after the Department of Justice
said the government shutdown will likely delay its responses to public comments
it received about the tie-up.
The
DOJ antitrust division cannot work on its responses until the government is
functioning at full capacity and funding is restored, unless ordered otherwise
by the court, according to the filing in D.C.'s district court.
Even
so, CVS CEO Larry Merlo sought to assure investors at J.P. Morgan's
Healthcare Conference in San Francisco, saying that CVS and Aetna were already
"one company." The comments came after a federal judge ordered
the pharmacy chain and payer to operate as separate units until he blesses the
$69 billion deal.
"I
want to unequivocally state that CVS Health and Aetna are one company and our
transformation work is already underway," Merlo said. He noted the
two have already made substantial progress on integrating Aetna into CVS.
"The
ongoing court review and the voluntary commitments that we have in place will
not impact the timeline for achieving the targeted synergies," he said
during his presentation to investors Tuesday. CVS expects to achieve more than
$750 million in savings, or "synergies," in 2020 through reduced
corporate expenses.
CVS
shares slumped 4% at Wednesday's close compared to the day prior.
D.C.
District Court Judge Richard Leon has yet to sign off on the deal after
raising concerns about
whether the agreement with the DOJ goes far enough to protect consumers.
He pointed to the fact that the settlement addressed
only a sliver of the transaction (what he characterized as "one-tenth of
one percent") of the multi-billion dollar deal.
On
Dec. 21, Leon ordered the two companies to:
- Operate
Aetna's health insurance business as a separate and distinct unit from CVS'
retail pharmacy and its pharmacy benefit manager CVS Caremark;
- Maintain
Aetna's control over pricing and product offerings;
- Maintain
Aetna employees' compensation and benefits;
- Maintain a firewall between Aetna
and CVS to prevent the exchange of competitive information.
Instead
of continuing with the monitor Leon previously appointed to oversee the
separation between the two, CVS committed to providing sworn statements each
quarter to show compliance. CVS provided its first sworn statement Friday,
which had various executives swearing to the tenets of the judge's order that
the company is operating those units separately.
Meanwhile,
in D.C. on Wednesday, Senate Finance Committee Chairman Chuck Grassley
told a group of reporters that he plans to scrutinize giant insurer mergers
such as the CVS-Aetna deal.
He
said he even discussed antitrust concerns in the healthcare sector with DOJ
Attorney General nominee William Barr on Wednesday morning.
"This
is a major issue of mine," Grassley said. "I want to make sure
that the antitrust laws are enforced, I intend to pursue with the justice
department to make sure they are doing thorough reviews. When you have less
competition, you have higher prices."
David
Lim contributed reporting.
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