Government shutdown poses another hiccup for CVS-Aetna
The CVS-Aetna megamerger hit another snag this week after the Department of Justice said the government shutdown will likely delay its responses to public comments it received about the tie-up.
The DOJ antitrust division cannot work on its responses until the government is functioning at full capacity and funding is restored, unless ordered otherwise by the court, according to the filing in D.C.'s district court.
Even so, CVS CEO Larry Merlo sought to assure investors at J.P. Morgan's Healthcare Conference in San Francisco, saying that CVS and Aetna were already "one company." The comments came after a federal judge ordered the pharmacy chain and payer to operate as separate units until he blesses the $69 billion deal.
"I want to unequivocally state that CVS Health and Aetna are one company and our transformation work is already underway," Merlo said. He noted the two have already made substantial progress on integrating Aetna into CVS.
"The ongoing court review and the voluntary commitments that we have in place will not impact the timeline for achieving the targeted synergies," he said during his presentation to investors Tuesday. CVS expects to achieve more than $750 million in savings, or "synergies," in 2020 through reduced corporate expenses.
CVS shares slumped 4% at Wednesday's close compared to the day prior.
D.C. District Court Judge Richard Leon has yet to sign off on the deal after raising concerns about whether the agreement with the DOJ goes far enough to protect consumers. He pointed to the fact that the settlement addressed only a sliver of the transaction (what he characterized as "one-tenth of one percent") of the multi-billion dollar deal.
On Dec. 21, Leon ordered the two companies to:
- Operate Aetna's health insurance business as a separate and distinct unit from CVS' retail pharmacy and its pharmacy benefit manager CVS Caremark;
- Maintain Aetna's control over pricing and product offerings;
- Maintain Aetna employees' compensation and benefits;
- Maintain a firewall between Aetna and CVS to prevent the exchange of competitive information.
Instead of continuing with the monitor Leon previously appointed to oversee the separation between the two, CVS committed to providing sworn statements each quarter to show compliance. CVS provided its first sworn statement Friday, which had various executives swearing to the tenets of the judge's order that the company is operating those units separately.
Meanwhile, in D.C. on Wednesday, Senate Finance Committee Chairman Chuck Grassley told a group of reporters that he plans to scrutinize giant insurer mergers such as the CVS-Aetna deal.
He said he even discussed antitrust concerns in the healthcare sector with DOJ Attorney General nominee William Barr on Wednesday morning.
"This is a major issue of mine," Grassley said. "I want to make sure that the antitrust laws are enforced, I intend to pursue with the justice department to make sure they are doing thorough reviews. When you have less competition, you have higher prices."
David Lim contributed reporting.