The Coalition to
Protect Patient Choice
A Project
of the
Law Offices
of David Balto
Competitive healthcare is healthcare with choices
Advocacy on consumer healthcare competition issues aimed at lowering prescription drug costs
Why mergers matter
California Commissioner of Insurance
opposes merger in open letter
American Medical Association
opposes merger in open letter
CVS-Aetna is a Robber Baron's Dream
Article by David Balto | The Hill | 12/6/17
Why DOJ must block Express Scripts-Cigna merger
Article by David Balto | The Hill | 3/27/18
The largest PBMs operate in a largely opaque black box. This lack of transparency enables near monopolistic power that is wielded to strong arm business practices benefitting their bottom line at the expense of patients.
In fact, the Council of Economic Advisers identified lacking competition amongst PBMs as a contributing factor in the rising price of drugs. Their study showed that three PBMs controlled more than 85 percent of the market, “which allows them to exercise undue market power against manufacturers and against the health plans and beneficiaries they are supposed to be representing, thus generating outsized profits for themselves.”
The pending mergers between PBMs and insurers: CVS Caremark & Aetna as well as Express Scripts & Cigna will increase the market power of the resulting umbrella groups while reducing what little transparency exists through inter-entity bargaining along the pharmaceutical supply chain. As reported by Tara Bannow in Modern Health, "Sarah Behnke, a senior actuary with Aetna, filed the lawsuit in 2014 alleging that CVS Caremark was getting better prices on drugs with its pharmacies, but was not passing those savings to Medicare Part D". This suit exemplifies the kind of PBM malpractice that would be off the record should these entities merge.
"A combined CVS-Aetna could position itself as a formidable figure in this changing landscape," write Michael J. de la Merced and Reed Abelson about the $69 billion merger. However, it is not only a single merger that poses such a threat to patient prices for pharmaceuticals, but rather a growing trend.
Stephen Klasko, president and CEO of Jefferson Health and Thomas Jefferson University in Philadelphia says, "the combination of mergers across sectors is the beginning of a revolution."
Amazon, JPMorgan Chase and Warren Buffet's Berkshire Hathaway deciding to form an undefined health care company. -Alison Kodjak
Instead of allowing the arena where PBMs operate unchecked to widen, we need to assess effective ways to inject competition and transparency into the market place. That begins with a hearing over these mergers. While some people believe they should be opposed outright, others believe conduct clauses would suffice.
The American Medical Association, opposing the mergers, submitted a letter to the Assistant Attorney General pointing out the anti-competitive nature of the CVS/Aetna merger. While the proposed merger is vertical, acquiring a different entity along the supply chain, horizontal competition stands to be the heavily affected as well. These comments come a few months after the Department of Insurance hearing in California, lead by Commissioner David Jones, where academic experts outlined the harms that PBM/insurer giants pose as a combined force. David Jones later released a letter at the beginning of August that advocated strongly against the merger. Proponents of the merger argue the acquisition would bring about efficiency savings that would be passed on to consumers. However, a 2015 UnitedHealthcare acquisition of CatamaranRx, into its OptumRx PBM has shown no evidence of consumer benefits. Before that, in 2011, Express Scripts and Medco merged, leaving consumers with higher prices and less choice.
The FTC describes the market as competitively healthy. We would counter that three PBMs dominating 85 percent of their market tier is hardly thriving, diverse competition. Furthermore, the absence of strong competing forces allows PBMs to pocket rebates, lacking the incentive to cut costs for consumers by passing along those savings. In fact, rebates have tripled to over $170 billion between 2012 and 2018, with increasingly smaller portions of rebates being passed on to patients. ESI and CVS have acquired or driven out rival specialty pharmacies, expelling them from their networks, and targeting their consumers.
The current administration has been vocal about the potential passage of regulation to require the passing of rebates to Medicare beneficiaries as well as the elimination of anti-kickback safe harbors for rebates. Members of the Senate have also taken to the floor to decry the practices of PBMs and untangle the knots around increasing drug prices. These actions are welcome reinforcements to a wave of state-level legislation, Department of Insurance hearing, and litigation (over 20 antitrust or fraud cases have been filed over the last two years).
In October 2018 we testified before the New York Department of Financial Services in opposition to the proposed merger of Aetna and CVS, which would harm consumers and competition by leading to higher health care costs and reduce consumer choices. And in October 2018 the Department of Justice announced its approval of the Anet and CVS merger, although it will require the companies to divest Aetna's Medicare Part D prescription drug plan.
However, Judge Richard Leon still must approve the merger, and he has criticized the Department of Justice for failing to consider the harm to competition and consumers that would result from this deal. He has ordered CVS and Aetna to keep many of their operations separate while he reviews the merger.
On December 17th, 2018 we submitted comments on behalf of Consumer Reports, U.S. PIRG, Consumer Action, and the Universal Healthcare Foundation of Connecticut opposing the merger of CVS and Aetna. We argue that the divestiture is totally inadequate to fix the merger, that the Court has an important role to play in safeguarding the public interest, and that it should carefully review the merger to make sure consumers and competition are protected.
From June 4th-5th, Judge Richard Leon held a two day hearing where he heard from supporters and opponents of the merger.
On September 4th, Judge Leon approved the CVS-Aetna merger.