by Leslie Small
Facing an unexpected
judicial roadblock in the plan to combine their two business, CVS Health Corp.
and Aetna Inc. successfully negotiated a deal to keep their PBM and health
insurance operations separate for at least the next few months.
At the heart of the
holdup is U.S. District Court Judge Richard Leon, who has the right to review
the agreement that CVS and Aetna struck with the DOJ to resolve antitrust
concerns with their deal.
CVS said it is currently
operating Aetna's health insurance business separately from CVS's retail
pharmacy and PBM business units, with Aetna maintaining control over pricing
and product offerings. Aetna personnel will also retain their current
compensation and benefits, and CVS will maintain a firewall to prevent the
exchange of competitively sensitive information between the two companies.
Leon issued a Dec. 21
order accepting CVS's plan, saying he's satisfied that "so long as these
measures remain in place, the assets involved in the challenged acquisition
will remain sufficiently separate" to facilitate his review of the deal.
John Matthews, KPMG's
strategy leader for health care and life sciences, points out that if the
restrictions remain in place for a long time — or potentially permanently —
"then I think it actually really undermines the strategic rationale and
value creation proposition for what the deal is intended to do."
In particular, if the
firms have to keep their PBM separate from their insurance business — in terms
of both product offerings and data sharing — that could stymie "what was
going to be exciting and different about the deal, which was it allowed them to
combine pharmacy and benefit data to really understand total cost of care for
certain key conditions," he adds.
Whether that comes to
pass largely depends upon timing, according to Matthews. "I think if they
start getting into six, nine, 12 months, then it starts becoming a problem,
even if it’s not a permanent injunction," he says.
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