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CVS deal for Signify seen facing tough antitrust review

CVS Health Corp's (CVS.N) plan to buy healthcare services company Signify Health for about $8 billion will face a tough U.S. antitrust review even though the two companies do not compete directly in any markets, three experts said Tuesday.

High and rising healthcare prices, which have put even older drugs like insulin out of the reach of poorer people, have bedeviled U.S. presidential administrations determined to slow the rising costs. The Federal Trade Commission has long emphasized health deals in its antitrust reviews, and has continued that under new Chair Lina Khan.

CVS said Monday it agreed to buy Signify for $30.50 a share in cash, as well as about $400 million in equity appreciation rights, in a deal that would allow CVS to provide further care management to patients in their homes. CVS runs pharmacies, pharmacy benefits and the Aetna insurance plans.

"I would think in ordinary times, this one could go through," said Seth Bloom of Bloom Strategic Counsel and a former general counsel to the U.S. Senate Judiciary Committee's antitrust subcommittee, who predicted that the deal would be reviewed by the FTC.

"It will be a tough one to get through a Lina Khan-run FTC," he said.

Bloom was one of three antitrust experts who said the planned merger could face antitrust headwinds. If the FTC does not review the deal, it would be probed by the Justice Department.

David Balto, an antitrust lawyer who has battled big healthcare deals in the past, agreed. "The agencies know they have to turn their attention to vertical acquisitions that can be used strategically to raise barriers to entry," he said. Vertical deals are ones in which companies merge with a supplier, which might also work with the buyer's competitors.

Balto argued that the CVS plan to buy Signify raised concerns similar to those concerning UnitedHealth Group's (UNH.N) $8 billion deal to buy Change Healthcare (CHNG.O), which the government sued to block. The case is set to be decided by a judge in coming weeks.

CVS stressed in its comments that the Signify deal was not one between rivals, something that usually eases antitrust concerns. "We're not competitors and have no overlapping functions," said spokesman T.J. Crawford.

The American Economic Liberties Project urged antitrust regulators to block the deal, calling it "dangerous."

"Allowing CVS to expand its market dominance will only harm patients seeking personalized and quality care, take power away from physicians, and create even more data privacy concerns in healthcare," said Sara Sirota, a policy analyst for the group in a statement.

Andre Barlow, an antitrust lawyer with Doyle, Barlow and Mazard PLLC, said the FTC would likely have concerns because the deal would strengthen CVS, already a healthcare powerhouse.

"The FTC will certainly take a serious look to make sure there is no harm to rivals and patients," he said in an email interview, which noted heightened concerns about vertical deals.

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