Dana
Elfin June 4, 2019
Dive Brief:
·
Neeraj Sood made the American Medical Association's case
against the CVS-Aetna merger on Tuesday as the first witness to testify at an
evidentiary hearing before Judge Richard Leon of the U.S. District Court for
the District of Columbia. Nood is health policy professor and vice dean for
research at the University of Southern California Sol Price School of Public
Policy.
·
The AMA has filed papers objecting to the union of the two
companies. On Wednesday, Leon will hear from witnesses for CVS and the
government. The hearing is set to wrap up Thursday.
·
Though the CVS-Aetna deal closed last year, Leon has yet to give
his blessing to the settlement agreement and has said he has significant
concerns about the merger's effects on competition. This hearing will help him
decide. It is the first time witness testimony will be taken in Tunney Act
proceedings.
Dive Insight:
The
government's settlement agreement with CVS over its merger with Aetna
required Aetna to sell off its
Medicare Part D prescription drug plans (PDP) to rival WellCare. But Sood told
the judge the divestiture won't solve the anticompetitive concerns raised by
the merger.
Leon is
tasked with reviewing the settlement under the Tunney Act, which gives courts
the power to review DOJ decisions. That law gives him significant discretion to
determine if the settlement is in the public interest.
Leon
has been skeptical of the CVS-Aetna deal struck with DOJ. He previously said
the settlement addresses only "about one-tenth of 1%" of the nearly
$70 billion mega-merger.
"In
assessing whether or not the merger is in the public interest or not, which is
my job, should I limit myself to the PDP market or should I look to
the entities that are going to impact the greater market?," the judge asked
Sood, the first of six witnesses to testify at the hearing.
"That
is a very loaded question," Sood told the judge. But he told
Leon the effects of the merger would go beyond the PDP market and
affect the broader healthcare market. Among the likely effects he said would be
increased premiums and increased government subsidies to enrollees' Part D
premiums.
The
sell-off of the Aetna PDPs to WellCare won't solve the anti-competitive
effects of the deal as the government contends, Sood told the judge.
The
merger means the loss of Aetna, "a very strong competitor" from the
PDP market and the resulting loss of head-to-head competition between Aetna and
CVS, Sood told the judge. And, Sood said, WellCare is not equipped to
step into Aetna's shoes.
"WellCare is
a much weaker competitor than Aetna," lacking Aetna's brand recognition,
economies of scale and larger subscriber base, Sood testified. Aetna's total
PDP subscribers totaled approximately 2.2 million, Sood said. WellCare has
half that with approximately 1.1 million standalone Medicare Part D
PDP members.
"No
matter how strong WellCare gets, there will still be significant competitive
concerns," Sood said, noting WellCare gets its pharmacy benefit
management (PBM) services from CVS itself. This means CVS has the ability
to increase costs or otherwise disadvantage WellCare. In addition, he said,
WellCare is unlikely to be able to retain all of Aetna's customers, he said.
Witnesses
for the AIDS Healthcare Foundation and U.S. PIRG and Consumer Action were also
scheduled to testify about the negative effects of the merger on Tuesday.
Witnesses for the government and CVS are scheduled to testify Wednesday.
Meanwhile,
WellCare may itself be the subject of an antitrust probe as it is planning to
merge with Centene, the leader in Medicaid managed care plans in the
country. The American Hospital Association wrote to the U.S.
Department of Justice asking for a thorough review of the deal, which it said
"threatens to reduce competition in delivery of Medicaid Managed Care and
Medicare Advantage services to tens of millions of consumers across broad
swaths of the country."
No comments:
Post a Comment