by Bruce Japsen
Published in Forbes, 2/1/18
The top insurance official in California urged the U.S. Justice Department to block the merger of CVS Health and Aetna, saying it would “have significant anti-competitive impacts on American consumers and health care and health insurance markets.”
The findings and recommendation by California Insurance Commissioner Dave Jones doesn’t derail the effort by CVS Health to buy Aetna, but the state regulator could have influence with the U.S. Justice Department as it evaluates the deal. California's insurance regulator described the Justice Department evaluation of the Aetna-CVS deal as "open" and outlined its reasoning for DOJ to block it in a 15-page letter.
"The proposed merger of CVS and Aetna will significantly reduce competition in the PBM and Medicare Part D markets, affecting millions of health care consumers throughout the country," the California Insurance Commissioner said in a statement Wednesday afternoon. "A merger of this size and type, according to experts on health insurer and health care mergers, will likely lead to increased prices and decreased quality."
The decision comes following a hearing in June that included testimony from medical care providers like doctors from the American Medical Association who urged the regulator to stop the deal. CVS and Aetna executives also testified at the hearing.
"We urge other state regulators to review the evidence and take similar action," AMA president Dr. Barbara McAneny said Wednesday after news of the California Insurance Commissioner's decision broke.
"If left unblocked, there is every indication that the merger would raise prices, reduce choice and stifle innovation in five poorly performing markets: Medicare Part D stand-alone prescription drug plan, pharmacy benefit management services, health insurance, retail pharmacy, and specialty pharmacy."
Reached Wednesday evening for comment, CVS said it "strongly" disagrees with the California Insurance Commissioner's recommendation to DOJ.
"As the Commissioner expressly states in his letter, the California Department of Insurance 'does not have direct approval authority over this proposed acquisition,'” CVS said in a statement.
"Our vision is to create a new health care model that will help consumers improve their health by focusing on prevention and primary care, simplifying their health care experience and reducing costs," CVS said. "We believe that competition within each of the business segments in which we operate – pharmacy benefit management, pharmacies and insurers – is fierce and will remain so. Further, the combination of our two companies would allow us to explore new benefit designs with $0 co-pays or reduced cost-sharing, passing on additional savings to consumers, including employers."