CVS Health is closer to finding out whether a federal judge will force it to unwind the settlement agreement it entered into with the government to close its acquisition of Aetna after oral argument wrapped up Friday.
Judge Richard Leon of the U.S. District Court for the District of Columbia, who is presiding over an unprecedented hearing of the $69 billion deal, acknowledged his decision could affect millions of people but didn't hint when he might rule.
The judge is tasked with reviewing the settlement under the Tunney Act, which gives courts the power to review DOJ decisions and reject them or order modifications if they're not in the public interest.
The government's settlement agreement with CVS and Aetna required the insurance giant to divest its Medicare Part D prescription drug plans to insurer WellCare to remedy anticompetitive concerns about the deal.
While courts traditionally have blessed such deals, Leon could require the companies to do more if he decides the existing agreement isn't in the public interest.
Even though CVS is now operating and reporting results to Wall Street with Aetna included, Leon's decision could have huge repercussions, especially if he orders CVS to take additional steps beyond Aetna's divestiture of its PDP business.
"The decision is of great consequence to millions," Leon noted at the proceeding.
Leon's Tunney Act review of the CVS settlement agreement is already unusual, not just for the length of time it's taking but also because it marks the first time a court has taken testimony from entities beyond the government and the companies involved in the merger.
Attorney Jay Owen of the U.S. Department of Justice told Leon he should discount many of these opposing groups' arguments calling them outside the scope of judge's review.
Owen told the judge his review was limited to "only whether the judgment is in the public interest" not the merits of the merger itself. "The Tunney Act inquiry is limited to whether the divestiture reasonably addresses the alleged harm," Owen said.
The lawyer argued the Aetna's divestiture of its PDP business "satisfies the public interest standard of the Tunney Act."
But several of Leon's questions during oral argument suggested he might consider anticompetitive harms outside the Tunney Act as a basis to reject the settlement.
The judge seemed particularly interested in AIDS Healthcare Foundation lawyer Christopher Casey's suggestion of additional remedies that could be put into place on top of the divestiture of the PDP plans the companies were already required to complete.
Those proposed remedies included requiring CVS allow all rival pharmacies access to to its pharmacy network, allowing all Aetna plan members to opt out of using CVS mail-order pharmacy and allowing all managed care companies access to the CVS Caremark PBM.
Leon asked Owen whether there was anything "wrong" with AHF's proposed remedies. The government, while taking no position on the remedies, maintained they weren't necessary because the existing settlement resolved all the anticompetitive harms from the deal.
Meanwhile, CVS counsel Enu Mainigi also rejected the proposed remedies, telling the judge they would be "affirmatively harmful to consumers."
"The remedy would remove competition and choice from the marketplace," she told Leon. "Congress is the right place to deal with PBM reform, not this court," she said.
In this case, the judge has also heard testimony from American Medical Association, U.S. PIRG and Consumer Action who oppose the settlement agreement and the states of California and Florida who support it.
A decision is expected in a few months but the judge didn't give a firm timeline. "Obviously, it's an extremely high priority," he said.
And if the judge does reject the settlement, it's almost certain the government will appeal to the U.S. Court of Appeals for the D.C. Circuit.