- CVS Health's $69 billion merger with Aetna hit a potential wall in New York state, the last major OK needed to complete the megadeal.
- It came a day after the Connecticut Insurance Commissioner Katherine Wade issued an order approving the merger, pending divestiture of the companies' Medicare prescription drug business. CVS has agreed to keep Aetna headquarters in Hartford for at least 10 years as part of the transaction, the Hartford Courant reports.
- During a Thursday public hearing, New York Department of Financial Services (DFS) Superintendent Maria Vullo threatened to derail the merger unless the companies agree to not raise insurance premiums in the state and agree to state regulation of CVS' pharmacy benefits manager, the New York Post reports.
New York officials confirmed that Vullo is concerned CVS could raise premiums for 1.1 million Aetna policyholders in the state to help offset $40 billion it borrowed to finance the merger. "In our view, there must be a clear enforceable commitment not to transfer the cost of paying back loans to policyholders," the Post reported Vullo saying at the hearing.
A final decision on whether to approve the merger will be made once the record closes Thursday, a DFS spokesperson told Healthcare Dive.
Meanwhile, CVS Health CEO Larry Merlo praised Wade's decision. "Connecticut is our primary regulator, so this approval represents a significant step forward for our companies," he said in a statement posted on Twitter.
New York is not the only state wary of the merger, which would create a company with annual revenues of about $245 billion. In August, California urged the U.S. Department of Justice to block the deal, claiming it would harm competition in the PBM and Medicare Part D markets across the U.S.
The companies cleared a major hurdle Oct. 10, when the DOJ said it would not challenge the merger so long as they shed Aetna's Medicare Part D business. That should not be a problem, as Aetna has already found a buyer in a subsidiary of WellCare.
If CVS and Aetna can convince New York regulators that the cost of premiums won't rise and agree to PBM regulation, it should be smooth sailing ahead. Merlo has said he expects to complete the merger by the end of this year.