A federal judge on Wednesday, Sept. 4 approved a Justice Department settlement that allowed CVS Health's nearly $70 billion acquisition of health insurer Aetna Inc., removing a cloud of uncertainty for the merged company, which had announced the merger back on November 28 2018.
As Brent Kendall wrote on Wednesday in his report in The Wall Street Journal, “U.S. District Judge Richard Leon had spent months questioning whether the settlement did enough to protect competition and consumers in health-care markets, raising the possibility that he might not approve it. The judge, in a first for a court review of a government merger settlement, convened hearings to consider live witness testimony from the deal’s critics who said the Justice Department’s deal with the companies was inadequate. Judge Leon on Wednesday said the critics’ testimony ultimately was unpersuasive. He said the health-care markets at issue in the case “are not only very competitive today, but are likely to remain so post-merger.” The settlement “is well within the reaches of the public interest,” the judge concluded.
“CVS Health and Aetna have been one company since November 2018, and today’s action by the district court makes that 100 percent clear,” CVS said in a statement. “We remain focused on transforming the consumer health care experience in America.” U.S. District Judge Richard J. Leon had initially ordered hearings after he said the Justice Department and the companies acted like his approval was a mere “rubber stamp.” The companies had closed the deal just one month after reaching an agreement with federal regulators, which angered Leon. On Wednesday, Leon officially signed off on the agreement reached between the two companies and federal regulators.
Leon said in his ruling that groups challenging the merger were unable to show that it would result in CVS gaining the ability to steer patients away from their current providers. “The markets at issue are not only very competitive today, but are likely to remain so post-merger,” Leon wrote. “Consequently, the harms to the public interest the [opponents] raised were not sufficiently established to undermine the Government's conclusion to the contrary.”
As Nathaniel Weixel wrote in a report published in The Hill on Wednesday, “Leon said in his ruling that groups challenging the merger were unable to show that it would result in CVS gaining the ability to steer patients away from their current providers. “The markets at issue are not only very competitive today, but are likely to remain so post-merger,” Leon wrote. “Consequently, the harms to the public interest the [opponents] raised were not sufficiently established to undermine the Government's conclusion to the contrary.” Merger settlements negotiated between the Justice Department and companies require court approval, but Leon’s involvement and his decision to hold hearings were highly unusual. Antitrust experts have said it’s unheard of for a federal judge to force companies to make substantial changes to a merger, even if the judge has some authority to question a federal settlement.
The WSJ’s Kendall noted that “The merger combined the nation’s third-largest health insurer with CVS’s sprawling network of pharmacies and its pharmacy-benefit-management business. The companies argued that their combination could lower costs and improve health care for consumers.”
Responding to Judge Leon’s ruling, a CVS spokesman said that “CVS Health and Aetna have been one company since November 2018, and today’s action by the district court makes that 100 percent clear. We remain focused on transforming the consumer health care experience in America.”
An array of parties, including the American Medical Association and consumer groups, lodged objections to the merger, saying the deal would have anticompetitive effects throughout the health-care supply chain, giving CVS an outsize role.
Judge Leon said while the complaints warranted serious consideration, the evidence wasn’t sufficient to reject the government’s settlement with the companies. He rejected critics’ arguments that the merger would harm markets for Medicare prescription drug plans. He also said CVS is unlikely to use its strong market position in the management of pharmacy benefits to disadvantage companies that compete with CVS’s newly expanded health-insurance business.
The AMA expressed disappointment in the ruling. “Despite an unprecedented review that dragged many details of this merger into the light, today’s decision ultimately fails patients, will likely raise prices, lower quality, reduce choice, and stifle innovation,” AMA president Patrice A. Harris said.
As Reuters noted on Wednesday, CVS, the pharmacy chain and benefits manager, has been converting itself into a health care company, and said in June that it would offer expanded health services such as nutrition counseling and blood-pressure screenings in 1,500 stores by the end of 2021.
