CVS and Aetna Cleared for Merger as Companies Tighten Leadership Roles

Published: Oct 11, 2018 By

Department of Justice_Mark Van Scyoc_Editorial

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The U.S. Department of Justice has given preliminary approval for CVS’ $69 billion acquisition of Aetna after Aetna divested its Medicare Part D business.

As CNBC reported, the deal was given the go-ahead after Aetna agreed to sell its Medicare Part D drug plan business to WellCare Health Plans. That sale was for an undisclosed amount, according to the report. There was concern among federal regulators that there would be an “overlap” between the Aetna and CVS Medicare Part D businesses, CNBC said. In a statement, Assistant Attorney General Makan Delrahim said Aetna’s divestiture allows for the “creation of an integrated pharmacy and health benefits company that has the potential to generate benefits by improving the quality and lowering the costs of the healthcare services that American consumers can obtain,” according to CNBC.

The DOJ go-ahead will allow for the finalization of the acquisition, which was originally announced in December 2017. The companies said the combination is a way to help bring down the costs of health care, particularly as it relates to prescription medications. CVS, as the argument goes, will be able to use its in-house medical clinics to help people with simple medical needs. That way, it will keep insurance costs lower and keep more people out of seeking minor medical help in hospitals. By keeping the patients at CVS for both a diagnosis as well as using its pharmacy to dispense medications, it will also improve care coordination for patients. By keeping things in a more contained manner, Aetna will be able to more effectively cover treatment for non-emergency health-care needs at a lower cost.

The DOJ clearance for the CVS acquisition of Aetna follows the department’s clearance of Cigna’s acquisition of Express Scripts. Wednesday’s announcement by the DOJ followed a previous announcement the federal agency made over the summer when it said it would not challenge the deal.

The merger of CVS and Aetna is part of a shifting landscape in the healthcare industry. And it’s a shift that will be felt by consumers and drugmakers alike. Pharmacy benefits managers, like CVS Caremark, play an increasingly important role in the price consumers pay for prescription medications. Drug manufacturers set a gross or list price for their medications, but that is not the retail price that consumers pay due to a number of cost-cutting programs in place, including rebates and bulk discounts. With CVS now taking a more publicly active role in providing the best retail price for consumers could be the catalyst for greater disruption within the healthcare system.

Some advocacy groups though are opposed to the deal. Last month the Association of American Physicians and Surgeons came out in opposition to the deal – particularly as the focus has increased on the service of the CVS medical clinics. Marilyn Singleton, president-elect of the association, said in a letter sent to the U.S. Attorney General, that the merger is “particularly troubling in light of the highly concentrated national market for PBM services and current lack of transparency in drug pricing and PBM contracts." Singleton went on to add that the merger is likely to “steer patients to insurance plans and site of care, and away from their trusted physicians.” Additionally, Singleton said the merger will make it “nearly impossible” for independent pharmacies and stand-alone PBMs to compete.

As previously announced, Aetna will be managed as a distinct operating entity within the CVS Health organization.

Following the news about the DOJ, CVS announced some changes to its leadership. Eva C. Boratto, who currently serves as CVS Health's controller and chief accounting officer, will become the chief financial officer of CVS Health. She will replace Shawn M. Guertin, who CVS said is leaving the company for personal and family reasons. Guertin will remain with CVS Health until June 2019 to help the combined company with “integration and financial planning strategy.” Additionally, CVS said that three additional Aetna directors with deep insurance company oversight experience will join the CVS Health Board following the completion of the acquisition of Aetna. Those three new board members, Edward J. Ludwig, Fernando Aguirre, and Roger N. Farah, will join Aetna's current Chairman and Chief Executive Officer Mark T. Bertolini on the board. 

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