Put the brakes on the CVS and Aetna merger to sustain competition and choice

Dec. 18, 2018

The Hill reports that one person stands between the American public and further increases in healthcare costs and further decline of care: U.S. District Judge Richard Leon. He is single-handedly questioning the government-approved $70 billion merger between CVS and the health insurer Aetna over public interest concerns. A court hearing is scheduled where Judge Leon may demand the companies halt integration while he reviews the antitrust issues. CVS and Aetna have argued that the vertical integration of their businesses would lead to better and more efficient care for consumers.

While Americans have radically different views on how to bring down skyrocketing healthcare costs, there seems to be a bipartisan consensus that increased consolidation among remaining healthcare behemoths is not the answer.

Both the Trump administration’s Health and Human Services and the left-leaning Center for American Progress have recently issued reports making the case for choice and competition rather than consolidation in the healthcare space. For good reason. Oligopolies reduce competition and raise prices. Studies have found that vertical integration is associated with higher prices. In California, for instance, hospital-owned physician practices have higher per-patient spending than physician-owned ones.

How would an Aetna-CVS merger increase costs? Both CVS and Aetna have been forthright in stating that their intended purpose is to expand on CVS Minute Clinics as their model for improving access to care. The 22 million Aetna enrollees could be financially led to use these clinics for their primary care needs.

This new captive audience will likely be required to use CVS pharmacies for their prescription and non-prescription needs, giving one of the biggest retailers in the country significant pricing power. Patients will lose the ability to shop around for a lower price.

In addition to more pricing power, minute clinics, staffed by mid-level professionals, not doctors, tend to over-prescribe and over-refer to specialists, driving up system costs. According to a Centers for Disease Control study released this year, nearly half of people who visit walk-in clinics with cold or flu symptoms walk out with an antibiotic, despite clear guidelines that antibiotics are useless for treating such viruses.

Minute Clinics are cheaper for a reason, namely they eschew committed doctors for roving health professionals. They disrupt the doctor-patient relationship that has long been proven to improve health outcomes, especially in cases of chronic illness which account for 86 percent of health-care costs in the U.S. A meta-analysis published this year in BMJ found a marked link between continuity of care and lower death rates. The trust, caring competence associated with this relationship leads to better health outcomes.

One other merger consequence patients would likely face is fewer prescription drug options. That’s because CVS, through its Caremark subsidiary, is a pharmacy benefit manager, which control the formulary of prescription drugs while receiving legalized kickbacks from drug manufacturers. Its leverage over manufacturers and drug choices will increase significantly with its massive new insurance customer base. As a result, CVS Caremark will be incentivized to provide those drugs that make a profit for its insured patients. Previously, Caremark had to respond (at least partially) to the market demands of the third party health insurers it was serving.

In contrast, the CVS-Aetna merger would consolidate the insurance, pharmacy benefit manager, pharmacy, Minute Clinic brick and mortar CVS stores, threatening to destroy an already eroding primary care system and fraying doctor-patient relationships.

At the moment, Judge Leon is the only one standing in the way of this future that threatens the public interest. But if the public can be educated on the merger consequences while he does, there’s still time to block it.

The Hill has the full story

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