The U.S. Justice Department today gave its approval to the merger of healthcare giants CVS Health and Aetna, but not without attaching conditions negotiated by California and other states.
The settlement requires Aetna to sell the Medicare Part D plans of 1.5 million people to their competitor, WellCare Health Plans, to ensure competition in the prescription drug benefit market for Medicare beneficiaries, said California Attorney General Xavier Becerra.
“We can’t stand idly by and watch a merger go through that could lead to higher prescription drug prices and fewer choices for our seniors,” said Becerra. “Market consolidation benefits big business’ bottom line at the expense of seniors’ pocketbooks. We know that over-consolidation is bad for healthcare and leaves millions of Californians with fewer options. We will keep close watch to ensure that the terms of this settlement are met.”
In addition to the WellCare transaction, Aetna is prohibited from selling any new Medicare Part D plans in 2020.
The proposed merger had raised significant antitrust concerns due to its potential impact on prescription drug prices for seniors in Medicare Part D, as well as individuals who are dually enrolled in both Medi-Cal and Medicare and who qualify for the federal Low-Income Subsidy Program.
The settlement resolves California’s yearlong investigation into the $69 billion merger and settles the Justice Department’s objections.
“Today’s settlement resolves competition concerns posed by this transaction and preserves competition in the sale of Medicare Part D prescription drug plans for individuals,” said Assistant U.S. Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “The divestitures required here allow for the creation of an integrated pharmacy and health benefits company that has the potential to generate benefits by improving the quality and lowering the costs of the healthcare services that American consumers can obtain.”
The merger joins two of the largest companies in the prescription drug market: CVS, which holds the second largest market share, with Aetna, the fourth largest. Without requiring Aetna to sell off part of its business in order for the merger to go through, the consolidation would have limited access to affordable prescription drug benefits.
It would have also harmed California’s most vulnerable populations, seniors ages 65 and over and people with disabilities, by reducing options and increasing healthcare costs, Becerra said. A recent report by the University of California at Berkeley’s Petris Center on Health Care Markets and Consumer Welfare confirms that rapid consolidation of healthcare markets in California has led to rising healthcare costs for consumers throughout the state.