California Insurance Commissioner Dave Jones today issued his finding that the proposed merger of CVS Health and Aetna, Inc. would have significant anti-competitive impacts on American consumers and health care and health insurance markets. Jones formally recommends that the United States Department of Justice sue to block the proposed merger.
On June 19, 2018, Jones held a public hearing at which executives of CVS and Aetna testified about the proposed merger. Expert testimony was provided by a panel of academics in the area of health care competition, with additional testimony from consumer and medical provider representatives, and members of the public. Reports prepared by the expert witnesses and comment letters from members of the public, as well as the hearing transcript, are available on the California Department of Insurance website. Jones reached his findings and recommendation regarding the proposed merger after he and the Department of Insurance conducted an in-depth review and analysis of the testimony, studies, and written comments.
Jones found that the proposed merger poses competitive concerns in the Medicare Part D market, where both companies currently compete, as well as in the highly-concentrated market for Pharmacy Benefit Manager (PBM) services, and in the retail pharmacy market. These anti-competitive impacts pose a risk of higher costs for California consumers.
“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,” said California Insurance Commissioner Dave Jones. “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. Further, partial divestiture or other remedies traditionally used by the Department of Justice will not adequately protect consumers or address the adverse consequences of a merger of CVS and Aetna. Traditional methods to avoid market concentration will not address potential impacts on service quality, the power to charge excessive rates, or the creation of barriers to block a potential market participant with the resources to enter into new markets.”