CVS, Aetna defend merger potential to Connecticut regulators
- Regulators with the Connecticut Insurance Department held a public hearing Thursday to review the $69 billion mega-merger between CVS and Aetna. Regulators posed a variety of questions to both CVS and Aetna executives about the deal, and subjects ranged from cybersecurity risk and concern over the debt load to the potential for anti-competitive effects.
- Executives from both companies made their case to the panel about how the deal would ultimately benefit consumers, resulting in easier access to health services that's far cheaper for consumers. Some said the deal was about eliminating silos in healthcare to better coordinate care for patients.
- During the public comment period, some warned the deal would result in higher prices and fewer choices for consumers while others applauded the deal and voiced their support.
The CVS-Aetna deal is considered to have a good chance for approval. The $67 billion tie-up between Cigna and Express Scripts has already been cleared by DOJ. Also, Aetna agreed last week to sell its standalone Medicare Part D business to help clear antitrust hurdles.
As the companies hope to gain clearance from the Department of Justice, a team of executives were in Connecticut on Thursday facing scrutiny from insurance regulators over the blockbuster transaction, which would have wide-ranging influence throughout the healthcare industry.
CVS' Thomas Moriarty, executive vice president and chief policy and external affairs officer, spent the morning explaining the benefits of the merger and said it would reduce complexity in the healthcare system by creating a model that was easy to use and ultimately less expensive for consumers.
Executives from both teams said that the current healthcare system is unsustainable and the deal was an attempt to better it.
The toughest line of questioning came from Paul Lombardo, an actuary for the department, who questioned the necessity of the deal.
"The current system is broken, but you’re a large part of it, how do you solve it together?" he asked, adding, "It's been mentioned today that the current system is broken. Aetna and CVS are a huge part of the current system so explain...how you're both part of a current system that's broken and you're very big players how you're going to try to fix this system with the merged company."
Paul Wingle, vice president at Aetna, said the fragmented system have posed challenges. "The elimination of this very important silo means that it's no longer that where one side's cost is another side's revenue," he said.
A key component of the deal, according to executives, is pairing Aetna's health plan with the CVS pharmacy benefit management arm, allowing the combined company to treat patients more holistically. They said CVS Minute Clinics are a key factor in holistic care for the combined company.
"They're already out there today," Lombardo said of clinics, adding that Aetna members have had access to them for years. "So what is going to change as a result of this merger that changes the visits to the ER, or the visits to other settings that are more costly, and moves these members more specifically into your lower cost of Minute Clinic type settings."
Executives said there was still work to be done on raising awareness and education about what setting of care is the right option. And when the two merge, they'll be able to use even more data to see if there are access hurdles to Minute Clinics that are preventing patients from going there today.
What they do know, Moriarty said, is that "50% of the folks that come to Minute Clinics come on nights and weekends when primary care generally isn't available."
It's unclear how much consumers can expect to save on their premiums following the tie-up, Moriarty said his company does not have a "firm" number in terms of cost savings. He explained that to achieve any savings CVS and Aetna would first have to bend the overall cost curve.
"You're changing the curve but not reducing expenses, you're just lowering the amount that it's rising or the trend that it's increasing," Lombardo said. Moriarty agreed.
Health economists from Georgia State University were present at Thursday's hearing and said that in a vertical merger like the CVS-Aetna deal there are some possible benefits for consumers but also the potential for anti-competitive effects. That's why William Custer and Robert Klein of GSU recommended that the department require the combined entity to provide metrics on price, quality and risk selection following the deal to ensure compliance.
At the end of the hearing, some spoke out against the merger.
Charles Bell of the Consumers Union said the deal will only increase prices and reduce consumer choice, particularly in the PBM market. He pointed to the fact that the top three PBMs already control 72% of the market. "These new insurance-PBM combinations threaten to be major healthcare oligopolies," he said.
In a letter sent to the state insurance department last month, New York's top financial watchdog warned the deal would have negative effects for consumers, including higher prices and less choice, particularly in Medicare Part D.