NY Department of Financial Services Hearing on CVS/Aetna Merger

Maria Vullo, the New York State Superintendent of Financial Services had a pro-consumer tone. She said she has a duty to protect consumers; the NYDFS has specific approval authority with regard to the CVS/AET transaction; and the DOJ approval of the deal took “a very myopic view” and failed to address vertical concerns. She said that there is no question that this transaction would have a significant impact on New York. Vullo expressed concerns regarding the deal’s impact on health insurance premiums, foreclosure issues that could disadvantage independent pharmacies, data privacy concerns, and the debt from the transaction. She said that CVS Pharmacy and Caremark are not regulated. She said that DFS has expressed substantial concerns about the role of PBMs in the high cost of drugs. She mentioned that DFS proposed legislation for the licensing and direct supervision of all PBMs in New York two years ago but legislature did not pass it. She said that the Department would continue to advocate for legislation.

CVS and AET provided testimony regarding the benefits of the transaction. Ms. Vullo asked CVS' general counsel if CVS would support legislation to regulate CMS and CVS would not, but CVS said it would not oppose it. Vullo also raised concerns with Aetna for not participating in the ACA and asked for it to participate.

Ten third party witnesses testified. Nine were opposed to the merger as proposed and only one, Lev Ginsburg from the Business Council of NY, testified in favor of the merger and he was grilled by Ms. Vullo.

Medical Society of the State of New York; two people from Pharmacists Society of the State of New York (“PSSNY”); a pharmacist provided additional testimony about her experience; Community Service Society of New York; Consumer Action, Consumers Union, Center of Disabled New Yorkers and Assemblyman Richard Gottfried, chairman of the Health Committee, all testified in opposition to the merger.

MSSNY discussed the risks of vertical integration and how it could harm consumers and asked for the merger to be rejected.

The PSSNY, which represents community pharmacies, is opposed to the deal. PSSNY described the deal as “tantamount to fox controlling the hen-house.” CVS and Aetna have not only not been part of the solution but they are part of the problem of rising healthcare costs. This acquisition will not result in greater choice, access or affordability, but the opposite. PSSNY also had a concern about how CVS/Aetna could play games with the medical loss ratio (“MLR”) requirements, whereby the merged firm may be able to take advantage of these by virtue of being vertically integrated. PSSNY also testified regarding the need for PBM regulation.

A pharmacist gave some powerful testimony about personal experiences of patients.

Consumer Union said the CVS/Aetna merger will have a major impact on every part of the healthcare marketplace. CU advocated blocking this deal or imposing appropriate regulatory conditions.

Consumer Action testified regarding the need for the Department of Financial Services to impose significant behavioral remedies to protect subscribers and market participants. Consumer Action also testified that the vertical integration of CVS and Caremark did not result in consumer benefits. In fact, the acquisition allowed the merged firm to engage in strategic exclusionary conduct that prevented consumers from accessing their pharmacists of choice and increased their costs for prescription drugs. Consumer Action recommended that the Department of Financial Services should continue to advocate for legislation to regulate PBMs and should impose behavioral conditions that would regulate the merging parties post merger conduct.

In closing, Maria Vullo said that no decisions on the merger have been made and that there is still time to put written comments on the record until October 25, 2018. The NYDFS plans on making a decision soon after taking into accounts all of the information in the record.