The Department of Justice issued a preliminary approval for CVS Pharmacy to acquire health care insurance company Aetna, possibly paving the way for transformative changes in the industry as cries for more affordable care emanating from consumers and regulators get louder. Regulators were concerned about the overlap between CVS' and Aetna's Medicare Part D plans. If the settlement is approved by the court, DOJ said it will "fully resolve the Department's competitive concerns".
"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 Aetna acquisition is among the most significant health care mergers of the past decade, combining one of the top USA drugstore chains with the third-biggest health insurer. Last month, federal antitrust authorities also gave the green light to health insurer Cigna's acquisition of pharmacy benefit manager Express Scripts.
The companies have said they will save administrative and patient care costs when they combine, in part by steering Aetna customers to walk-in clinics in CVS stores for less expensive medical services. Ana Gupte, equity analyst at Leerink Partners, said in a Wednesday research note that Guertin's exit, combined with the previously announced departure of CVS CFO David Denton "could pose some challenges given the complexity of the pricing and underwriting in the (Aetna) business amid the considerable integration challenges".
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Aetna shares were up 1.1 percent to $206.04 at 10:46 a.m.in NY. Year-to-date, CVS has gained 11.21%, versus a 5.65% rise in the benchmark S&P 500 index during the same period.
Aetna last month agreed to sell its Medicare prescription-drug business to WellCare Health Plans to alleviate concerns that a takeover by CVS would otherwise harm competition among plans that sell pharmaceutical coverage to seniors. The companies maintain that the deal will close during the fourth quarter of 2018.
"We are now working to complete the remaining state reviews", Larry Merlo, CVS' chief executive officer, said in a statement. 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. "Moreover, the anticipated efficiencies CVS and Aetna tout may benefit the merged company more than the consumer, who is likelier to be driven to use health care resources chosen by the health plan rather than those of his or her own choosing".
Driving that new approach to care will be the huge amounts of data generated not only by CVS's 9,800 retail outlets and 1,100 MinuteClinics, but also from Aetna's 22 million medical members.