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At Capitol Hill hearing, no red flags raised over CVS/Aetna deal

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At Capitol Hill hearing, no red flags raised over CVS/Aetna deal

Patient advocates, experts and members of Congress appeared to have few concerns about the combination of industry giants Aetna Inc. and CVS Health Corp. during a U.S. House hearing to discuss the deal.

Representatives from the companies were asked to inform a congressional subcommittee if there were antitrust or other issues with the proposed $69 billion merger.

Members of the Judiciary Committee Subcommittee on Regulatory Reform, Commercial and Antitrust Law asked two executives if the deal would keep the companies from doing business with independent pharmacies or other insurance companies. In tandem, the executives told members that independent pharmacies as well as other insurers would not be pushed out from the services the new entity would offer.

"For us to be competitive, we need to provide the breadth of coverage for all our members to be able to access healthcare," Thomas Sabatino, executive vice president and general counsel for Aetna, said. "We don't believe it will impact individual pharmacists in any significant way."

Thomas Moriarty, an executive vice president and attorney for CVS Health, expressed a similar view when asked if insurers would be barred from receiving benefits from pharmacies. Moriarty said CVS would "lose a lot of business" if it were to reject other insurance companies.

Moriarity's comments track with CVS President and CEO Larry Merlo's comments in early December 2017, when he said the company's recent claims processing and prescription contract with Anthem Inc. will continue, despite the planned merger with one of its main managed care competitors in Aetna.

Rep. Val Demings, D-Fla., told S&P Global Market Intelligence in an interview that while no red flags were raised by the executives' testimony, she would do everything in her power to ensure that underserved communities and independent pharmacies are not "pushed out" by the deal.

"I want to be sure that the consumer is always protected," Demings said. "I want to make sure independent pharmacies are not squeezed out of the market, that everybody can coexist and be able to make a decent living and provide to their communities."

Lawrence Wu, president of NERA Economic Consulting, told committee members that if the Department of Justice and the Federal Trade Commission approve the merger, it could achieve the positive outcomes for patients the companies have touted since the deal was announced.

Wu said that sometimes vertical mergers, or mergers between companies with little overlap in business, can raise concerns. But the CVS-Aetna merger has the "potential to align incentives," he said.

"The combined company can increase output, improve coordination among providers so that they can deliver a higher quality of care, and reduce or eliminate markups above cost that occur along the supply chain, which will help to lower prices," Wu said in prepared remarks.

The DOJ and FTC issued a second request for information about the merger on Feb. 1 and extended the waiting period to overcome antitrust hurdles in the transaction. The regulators have 30 days from that date to approve or deny the deal, or to ask again for more information.

The companies continue to expect the deal will be completed in the second half of 2018, and a shareholder vote for both companies has been scheduled for March 20.

"The jury is kind of still out," Demings said. "We're still listening, we're still gathering information. It's about making sure that nobody, consumers or more independent pharmacies, are hurt by this merger."