In a follow up to earlier pieces on this topic, the mega-deal that merged CVS and Aetna in the healthcare sector totaling about $70 billion could be challenged in federal court. The federal judge, Richard Leon, on Monday indicated that he could stop the activity of both companies to join forces and keep them as separate entities while he weighs the consumer impact of the merger.
This is out of the ordinary as the merger has met approval through the Justice Department and the federal court proceeding is often a mere formality. It should also be noted that Judge Leon is the same court officer which presided over the controversial AT&T / Time Warner merger proceedings; that was a recent topic here on Frank’s Forum, because of the content sharing issues taking place in that industry.
It is not a coincidence that Judge Leon, who has received plenty of criticism for his handling of the AT&T/ Time Warner merger, is now considering putting the brakes on this CVS/Aetna planned consolidation. The conflict of interest issue can be raised very easily in the case of CVS/Aetna because of what each entity specializes in separately.
The merger of a major healthcare/retail pharmacy company with a major health insurance carrier presents plenty of ethical concerns that could mollify the public interest. The concern is that Aetna-insured patients, whether it is individual policies or employer-provided policy coverage will be forced to fill prescriptions for medication at CVS locations exclusively.
A related concern for the consumer is when their employer-provided coverage changes to Aetna from another carrier, which then could force them into an prescription arrangement with CVS after the individual has a long-term routine and trust with another pharmacy. A similar concern was raised during the discussions of the merger in some forums online regarding rural areas that will require the consumer to drive farther to a CVS location if they are insured through Aetna, and in areas of the U.S. where CVS does not have a large presence.
In fair balance, some proponents of the merger state that it will provide better care for less cost. The addition of Aetna to their ranks will help CVS gain leverage with PBMs for the negotiation of pricing on prescription medications, which I covered in an earlier related piece.
The federal court could make this situation both very interesting and very difficult for those involved at CVS and Aetna. Judge Leon used words like “less convinced” that the merger was not an anti-trust violation. That is a very bold statement on the record and certainly could be motivated by the flack that the judge received in the AT&T decision.
Americans have long been concerned by anti-trust or monopolies because they represent, at the core, a break from our national ideals of competition in the marketplace as well as limiting consumer choice. The American consumer favors both choice and competition to create favorable conditions for price and service. The limitation of either of these market forces is looked upon rather negatively in the court of public opinion.
Both CVS and Aetna have to be alarmed that they are potentially being painted with the monopoly brush, and that this deal could unravel in the eleventh hour, unhinged by a judge who is essentially trying to rectify a previous miscalculation with the AT&T decision, which looks more like a monopoly with each passing day.
The central question is whether or not the combination of CVS and Aetna is within the best interest of the consumer. It is starting to look like that answer may alter one of the largest healthcare mergers in American history.
(some background courtesy of Reuters, CBS Market Watch, and CNBC)