Commentary

Consumer Advocates Jeer As Aetna, CVS Merger Is Cleared By Feds

With Aetna planning to sell its Medicare Part D business to WellCare Health Plans, the U.S. Justice Dept. yesterday okayed CVS Health Corp.’s $69 billion acquisition of the No. 3 health insurer. The merger still requires regulatory approval from some states, but the companies say the deal remains on track to close in the early part of the fourth quarter.

“The Aetna acquisition is among the most significant health-care mergers of the past decade, combining one of the top U.S. drugstore chains with the third-biggest health insurer. Along with its thousands of retail pharmacies, CVS manages drug-benefits plans for employers and insurers,” write Bloomberg’s David McLaughlin and Robert Langreth.

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“CVS has the largest market share in the Medicare drug-plan business, with around 6.1 million members, according to a recent tally from Wells Fargo. Aetna is the fifth-biggest Part D seller, with around 2.2 million members, according to Wells Fargo,” Anna Wilde Mathews and Micah Maidenberg report for the Wall Street Journal.

“To preserve competition where CVS and Aetna sell Part D plans head-to-head, the Justice Department had been expected to require the companies to sell off parts of their Part D business to a competitor that would compete with the newly merged firm. WellCare already had around 1.1 million Part D enrollees,” they continue.

“The tie-up will allow CVS -- whose retail pharmacy business serves 5 million customers a day -- to turn more of its brick-and-mortar locations into front-line clinics for basic medical services and patient monitoring. By deepening its knowledge of and relationships with patients, CVS has said the combination could help Americans stick with medication regimens and stay out of the hospital,” Brian Fung writes for the Washington Post.

“Driving that new approach to care will be the immense amounts of data generated not only by CVS’s 9,800 retail outlets and 1,100 MinuteClinics but also from Aetna’s 22 million medical members. The result could make CVS a destination for more than flu shots and treatment of minor illnesses,” Fung continues.

“CVS CEO Larry Merlo outlined his vision for the combined company in a Sept. 20 speech -- a new data-driven health-care model that’s more personal, convenient and tailored to individual patients than ever before. In combining CVS and Aetna, Merlo said the two companies will create a model that's ‘easier to use, less expensive and puts people at the center of their care,’” CNBC’s Angelica LaVito and Bertha Coombs write.

“It's the latest example of change in a health-care industry bracing for disruption while regulators and consumers demand lower costs. The DOJ recently cleared health insurer Cigna’s acquisition of pharmacy benefits manager Express Scripts,” they add.

Consumers Union, which opposed the Cigna deal from the get-go, also sees little good coming out of yesterday’s approval.

 “The combination of CVS and Aetna creates an enormous market force that we haven’t seen before, straddling more market sectors and creating new and potentially far-reaching profit-maximizing incentives to undermine competition. Despite the companies’ big promises that consumers will see greater savings thanks to new ‘efficiencies,’ history has taught us to remain skeptical,” CU senior policy counsel George Slover says in a statement.

“Amid the growing outcry over the high price of medicines, pharmacy managers have been vilified alongside big drug makers. Critics say pharmacy managers’ secretive deals -- under which price-setting strategies are not publicly disclosed -- enrich companies on all sides of the prescription drug pipeline while failing to benefit consumers,” points out Reed Abelson for the New York Times.

“In addition to the two major entities now attached to powerful health insurance companies, OptumRx, another major pharmacy manager, is owned by UnitedHealth Group. Anthem, which operates for-profit Blue Cross plans in several states, is developing its own in-house pharmacy operation,” he continues.

“There are going to be mammoth organizations,” Drug Channels Institute CEO Adam J. Fein tells Abelson.

That would include Amazon, “which looms large in the health care market even though it hasn't made a major entry yet. Amazon sells its own line of over-the-counter drugs online, and it recently bought online prescription delivery business PillPack. But Amazon does not sell insurance or clinical appointments,” as David Goldman observes for CNN Business. “Not yet, anyway,” he adds.

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