In a packed courtroom hearing Tuesday, D.C. District Court Judge Richard Leon suggested CVS Health appoint a monitor to keep a close eye on suggested separations between CVS and Aetna.
Leon suggested the monitor would report back to the court every 90 days on the status of four provisions CVS outlined in last Friday's brief: that Aetna operate its health insurance business independently from CVS' retail pharmacy and PBM; that Aetna will set its own pricing and product offerings; that Aetna employees will maintain their current compensation and benefits; and that CVS will keep up a firewall to prevent the exchange of sensitive data between it and Aetna.
CVS and the DOJ have until the end of business Thursday to weigh in formally on Leon's proposal for a monitor. "I don't actually think it would be efficient," CVS attorney Enu Mainigi said, while DOJ representative Jay Owen maintained "it is not necessary in this case."
Though the CVS-Aetna megamerger cleared all regulatory hurdles in late November, collecting 28 state nods and that of the DOJ, Leon is proving to be an unexpected wrench in the works.
On Friday, CVS-Aetna and the Department of Justice submitted court filings in defense of the drug chain's $69 billion buy of Aetna. Leon requested the briefs earlier this month over concerns that the retail pharmacy powerhouse and the country's third-largest insurer were treating him as nothing more than a "rubber stamp" on their marriage.
Though Leon can't tank the deal on his own, he can conclude the DOJ solution wasn't far-reaching enough to protect consumers and order CVS and Aetna to remain separate.
The burden is on the DOJ to back up its reasoning. The government doesn't appear to be happy with this.
Their brief, submitted Friday, mainly questioned whether the Tunney Act, which gave the court the power to review DOJ decisions, was constitutional itself, implying Leon only has the ability to accept or reject the consent decree, not "assume the role of Attorney General."
Leon didn't take this suggestive wording lightly, saying Tuesday it struck him as "unnecessarily defensive, if not hostile."
"I think you would do well, and your team, to re-evaluate the tone with which you address this court in your pleadings and your attitude" moving forward, Leon told attorney Jay Owen, who represented the DOJ Antitrust Division in the hearing.
CVS' brief, while no less stringent, took a more roundabout tact. It argued that any hold-separate order from Leon would hurt new ventures already being launched by the combining company, including medicine adherence and preventive health programs.
CVS also pointed to the length and comprehensiveness of the antitrust review, which took roughly a year to complete.
Leon complemented CVS' team for its pleading, calling it "constructive, helpful" and "appropriately deferential."
But earlier this month, Leon noted the settlement addressed only "one-tenth of one percent" of the almost $70 billion deal. Taking in debt, the deal would be worth $78 billion.
Leon's role is to provide the final green light by agreeing that the DOJ's condition for approving the merger, requiring that Aetna divest its Medicare Part D businesses, is sufficient for antitrust concerns. Experts say the district judge sign-off is usually a formality.
Though Aetna agreed to sell the business to a WellCare subsidiary in October, Leon is unsure.
"I am concerned that your complaint raises anti-competitive concerns about one-tenth of one percent of this $69 billion deal," Leon said during a Dec. 3 hearing.
According to the New York Post, sources close to the case expected Leon to issue an injunctive order to keep CVS and Aetna from integrating, which could delay the merger for months.
Certainty over the deal may last until early February, so that DOJ can respond to the about 95 comments they received on the case, Owen said, including one from the American Medical Association.
"With matters of this kind, generally, I think quicker is better than not quicker. Sooner is better than not sooner," Leon, who's been on the federal bench since 2002, said Tuesday.
Pharmacists United for Truth and Transparency (PUTT) and the Pharmacists Society of the State of New York filed a joint motion asking Leon to stop the merger to allow the court to investigate further the deal's effect on smaller competitors and consumers.
"History has shown that when CVS acquires rivals, consumers pay more and service and quality suffer," PUTT President Teresa Dickinson said. "Past acquisitions have enabled CVS to restrict consumer access and force them to use more expensive drugs."
The collective believes that, since WellCare contracts with CVS' pharmacy benefit management arm, Caremark, to administer the Medicare Part D portion of its business, September's divestiture is useless for antitrust concerns.