Federal judge signs off on CVS-Aetna merger after post-deal review

Shelby Livingston  September 04, 2019

A federal district court judge signed off on the $70 billion merger between CVS Corp. and Aetna on Wednesday after months of scrutinizing the U.S. Justice Department's antitrust settlement with the companies.

U.S. District Court Judge Richard Leon concluded in his opinion that "the proposed settlement is well 'within the reaches' of the public interest."

He further explained that despite critics' concerns that the merger would reduce competition, "CVS' and the government's witnesses, when combined with the existing record, persuasively support why the markets at issue are not only very competitive today, but are likely to remain so post-merger."

Judge Leon's probe into the CVS and Aetna's settlement with the Justice Department, which included Aetna's agreement to divest its standalone Medicare prescription drug business to WellCare Health Plans, was the final hurdle in the companies' merger process.

Despite the judge's review, CVS and Aetna had been operating as a single company since they announced the close of the merger back in November 2018.

In a joint statement, the two companies wrote they've been "one company since November 2018, and today's action by the district court makes that 100 percent clear."

Judge Leon's signature was required to authorize the federal government's approval the CVS-Aetna merger under the Tunney Act, though it wasn't clear if he had the ability to stop the merger. During oral arguments in July, Leon signaled that he was open to adding further conditions to the deal beyond what the Justice Department had demanded, but he didn't do so in the end.

In the opinion, Leon outlined critics' "substantial concerns" with the merger, which included concerns that it would harm competition in the prescription drug plan and PBM services markets while also harming patients with HIV and AIDS.

Critics such as the American Medical Association argued that Aetna's divestiture of its Part D business would do little to prevent the loss of competition in the prescription drug plan market because the buyer—WellCare— contracts with CVS for pharmacy benefit management and retail pharmacy services. The organization worried that CVS would restrict WellCare to using only its services.

But Leon said the critics did not persuade him that the concerns exist now or are likely to develop later. Instead, he said CVS did a good job explaining why the prescription drug plan market is already "highly competitive" and why CVS is unlikely to raise its prices for PBM services or steer patients away from their current healthcare providers.

In a statement, AMA President Dr. Patrice Harris said the court's decision "fails patients, will likely raise prices, lower quality, reduce choice, and stifle innovation."

She continued, "For patients and employers struggling with recurrent increases to health insurance premiums, out-of-pocket costs, and prescription drug prices, it's hard to find any upside to a merger that leaves them with fewer choices."

The AMA urged regulators to monitor the conduct of merged company to ensure it doesn't hurt patients.

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