Ahead of a federal court hearing on Tuesday, CVS Health is defending its merger with Aetna, through briefs filed on Friday.
On Friday, the Department of Justice, which has approved the acquisition, also filed a brief which states the court has the authority to reject a proposed merger settlement, but not the entire deal.
WHAT’S AT STAKE
There are two questions here. One is whether U.S. District Court Judge Richard Leon will rule against the merger settlement in the antitrust Tunney Act proceeding. The hearing is scheduled for Tuesday, Dec. 18.
The Department of Justice determined it would not seek to keep CVS Health and Aetna from integrating pending the Tunney Act proceeding.
CVS Health and Aetna announced integration plans after they closed the deal on November 28.
A federal judge’s authority to clear the deal is usually a procedural step and is unusual after the DOJ has approved it.
WHAT CVS HEALTH SAYS
For nearly a full year the merger and its competition and public-interest impacts were reviewed by the Department of Justice, and 19 state attorneys general. Congress held a public hearing on the competitive impact of the merger.
“The resulting settlement reflected a thorough and informed process that considered the views of supporters and opponents (composed almost entirely of CVS’s competitors) as well as consumer groups, physician groups, healthcare providers, and both firms’ customers,” CVS Health said in its brief.
Aetna divested of its Medicare Part D plans, as required under the settlement. Its individual Part D plan business was the one market in which CVS and Aetna competed.
“The merger, as modified by the divestiture of Aetna’s individual Part D business, does not increase concentration because it does not change CVS’s share of Part D enrollment. There thus is nothing more for CVS to do to resolve the complaint’s allegations.”
INTEGRATION VERSUS SEPARATE BUSINESSES
A hold-separate order halting or delaying merger integration would stop benefits from moving forward, such as cost savings totaling more than $ 1 billion annually, which will create downward pressure on pricing, CVS Health said.
It would prevent new clinical programs, including readmission prevention services, improved medication adherence programs, emergency room avoidance programs, expansion of home infusion services, and increased vaccination and immunization rate programs.
Aetna’s health insurance business is being operated separately from CVS retail pharmacy and pharmacy benefit manager, CVS Caremark.
Under Karen Lynch, former Aetna president and now executive vice president of CVS Health, Aetna will maintain its control over pricing and product offerings. Aetna personnel will retain their current compensation and benefits.
CVS Health said it would maintain a firewall to prevent the exchange of competitively sensitive information between CVS Health and Aetna.
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