The American Medical Association has released a report charging that CVS Health's proposed acquisition of Aetna would reduce competition in many markets, and therefore hurt patients.
AMA asked the Justice Department to challenge the $69 billion deal, saying the two companies are rivals in stand-alone Medicare Part D and pharmacy benefit manager markets. The group alleges that the merger would increase premiums because of market concentration in 30 of 34 Medicare Part D regional markets. In 10 of those markets, the deal would exceed a federal antitrust threshold that raises alarms because of enhanced market power.
Separately, Bloomberg reported that the Justice Department won't oppose the merger based on vertical competition issues, although it may still be looking at how it will affect competition in the pharmacy market.
AMA isn't alone in opposing the blockbuster deal. California Insurance Commissioner Dave Jones recently recommended the DOJ block it for similar reasons. Jones held a public hearing on the proposal in June, where the AMA first spoke out against the deal. "A merger of this size and type, according to experts on health insurer and healthcare mergers, will likely lead to increased prices and decreased quality," Jones said last week.
The DOJ already failed to stop the AT&T-Time Warner deal this year, which experts said was good news for megadeals like CVS-Aetna. Meanwhile, the other major vertical deal involving a payer, Cigna-Express Scripts, hit a rocky stretch this week.
Investor Carl Icahn, who owns 0.56% of Cigna, slammed the proposal as one of the "worst acquisitions in corporate history." Cigna shot back at the charge and called Icahn’s opposition "misguided and short-sighted."
Healthcare M&A remains hot. The second quarter of 2018 was the 15th in a row with more than 200 deals for the sector, PricewaterhouseCoopers said recently. However, there was only one megadeal in the second quarter. Plus, deal value was down 66.1% compared to the previous quarter and 50.7% year-over-year. Both deals involving Aetna and Cigna, which also looked into different mergers last year, would be considered megadeals.
PwC expects healthcare M&A activity to keep up the high pace with more vertical deals expected. If AT&T-Time Warner actually goes through, the consultancy predicts more megadeals in healthcare.
Pushing the activity is regulation and policy uncertainty, new technologies and new entrants in healthcare, lower inpatient volume, higher costs and more value-based care and population health management, PwC said.