Judge Approves CVS-Aetna Merger
Judge Richard Leon, who was reviewing the Department of Justice's decision to allow the pharmacy and pharmacy benefit manager (PBM) CVS to merge with the health insurance company Aetna, announced that the deal was lawful under antitrust law. While not unexpected, this is a big disappointment for consumers and competition, although there are some helpful precedents for future antitrust reviews.
The CVS-Aetna merger is a colossal transaction worth $70 billion, and it combines a health insurer and a PBM in a massive case of vertical integration. The Department of Justice (DOJ) agreed to the merger on the condition that Aetna sell its Medicare prescription drug business to another company called WellCare. Consumer groups and organizations, among them the AIDS Healthcare Foundation, the American Antitrust Institute Consumer Action, and U.S. PIRG, argued that this agreement was woefully inadequate to protect consumers.
The companies quickly began to merge and DOJ made it clear that they expected the judiciary to just rubber stamp the deal. Irked, Judge Leon responded by carefully investigating the merger and holding several hearings under the Tunney Act, which gives courts the power to review DOJ decisions regarding mergers and acquisitions.
At the hearings, we presented evidence that the CVS-Aetna merger would lead to higher prices, less competition and consumer choice, and lower quality health care. In his final decision Judge Leon wrote that the petitioners had raised a number of important issues, and that contrary to DOJ's assertions, the court has the power to look broadly at mergers and concerns about competition and consumer welfare. This is a helpful precedent for future antitrust review-courts will now be able to thoroughly review mergers and not just rubber stamp DOJ decisions.
However, the judge also accepted CVS's claims that the remedy would be effective and restore competition, and decided to let the merger go forward. The CVS-Aetna merger means that consumers will pay higher prices for health care and have fewer choices in the marketplace.
We are obviously quite disappointed in this decision, but hopefully there will be more ways to block anticompetitive mergers going forward.