- The Department of Justice said on Wednesday that it will not challenge the $69 billion merger of CVS and Aetna so long as the two divest Aetna's Medicare Part D business. Aetna has already agreed to sell the business to a subsidiary of WellCare.
- DOJ said the sale of the Medicare Part D business alleviates competition concerns the department had about the tie-up.
- The deal has already secured shareholder approval and is expected to be complete later this year.
With DOJ approval secured for the megamergers of both CVS-Aetna and Cigna-Express Scripts, a major sector of the healthcare industry is under a seismic shift.
CVS Health and Aetna's union pairs together one of the nation's largest drugstore chains, its pharmacy benefit firm and one of the nation's largest health plans.
The deal is aimed at simplifying the healthcare experience for consumers demanding change. Together, CVS and Aetna have promised they will "remake the consumer health care experience."
CVS executives said its pharmacists will play a critical role influencing patient behavior, especially for those Aetna members with chronic conditions such as diabetes. By leveraging CVS MinuteClinics and referring patients to less expensive modes of care, together the two will attempt to bend the cost curve.
In order to pass antitrust hurdles, Aetna sold its Medicare Part D business to a WellCare subsidiary, a deal that's expected to close at the end of this year. Aetna's standalone Medicare Part D covers about 2.2 million members.
The DOJ said the sale of the Medicare Part D plan was a condition of clearing the deal.
On Wednesday, the department and five other state attorneys general filed a civil antitrust lawsuit to enjoin the proposed merger, but included was the proposed settlement. If the settlement is approved by the court, DOJ said it will "fully resolve the Department's competitive concerns."
Under terms of the deal, DOJ said Aetna must allow WellCare the opportunity to hire key employees who currently operate the Medicare Part D business.
DOJ said that without the settlement, the merger would "cause anticompetitive effects, including increased prices, inferior customer service, and decreased innovation in sixteen Medicare Part D regions covering twenty-two states."
CVS and Aetna executives faced tough questioning from Connecticut regulators last week about the necessity for the merger. Company leaders told the state officials the current healthcare system is broken, which prompted regulators to ask how the two major players in the current, broken system plan to fix it together as one merged company.
In an attempt to answer the question, Paul Wingle, vice president at Aetna, said the fragmented system has 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.
The approval for both major PBM-insurance combinations — CVS-Aetna and Cigna-Express scripts — is in stark contrast to last year's proposed major mergers among insurers.
An attempt by Aetna to acquire Humana was ultimately blocked last year by antitrust regulators. So too was the proposed merger between Anthem and Cigna.
This year, the DOJ did not stand in the way of Cigna's takeover of Express Scripts. The tie-up secured DOJ approval Sept. 17, bringing together Cigna's medical benefit expertise and Express Scripts' PBM capabilities under one roof. The deal is expected to close at the end of this year.