After drawn-out legal proceedings with the Justice Department, CVS Health and Aetna have finally agreed to a gigantic $69 billion merger deal. provided that the companies divest part of the business prior to officially merging. This merger is the most recent in a spate of huge health insurance and health provider buyouts and mergers, which included the $52 billion buyout of pharmaceutical benefits company Express Scripts by Cigna, one of the largest health insurers in America.
This merger is one of the largest in history, as CVS is the biggest retail pharmacy and the second-biggest individual prescription drug plan provider in the United States. Aetna is the third-largest health insurance company in the U.S. and the fourth-largest insurer of individual prescription drug plans.
Though Aetna and Cigna have unsuccessfully attempted two healthcare mergers with Humana and Anthem before, which were both blocked by the Department of Justice between 2016 and 2017, this acquisition signals a consolidation of health care services under larger umbrellas. To some, the consolidation is worrying.
The Justice Department has cleared the merger of any antitrust concerns, but advocacy groups still believe that the reduced competition this merger creates could lead to reduced quality of healthcare products and services. The merger is under intense scrutiny from antitrust lawyers and the Federal Trade Commission to ensure that proper regulations are put in place.
The Justice Department’s tentative approval was conditional on Aetna divesting one section of its business: its Medicare Part D prescription business. Aetna’s Part D business focused on providing individual Medicare prescription drug plans in 16 Medicare Part D regions in the United States. These 16 regions covered parts of 22 different states, and Aetna contributed to a large share of all prescription drug plans in those regions.
In the Department of Justice’s reasoning for demanding that Aetna divest its Part D business, there appears to be a concern for anticompetitive effects due to CVS and Aetna both providing plans in many of those areas. If Aetna and CVS were to merge and not divest these plans, then the lack of competition in these regions could drive innovation down and prices up. Currently, Aetna and CVS have agreed to these terms and Aetna is in the process of unloading its Part D business.
Aetna and CVS maintain a positive outlook on what this merger could accomplish for consumers. They predict that CVS stores could become the go-to spot for prescriptions and basic medical treatment, as the merger provides for both under one comprehensive plan and CVS’s 10,000+ stores provide convenient access points for these services.
The enhanced connectivity of a single company may also be able to deliver more affordable care. However, the integration of companies this large may take more time than expected. With thousands of employees around the United States, streamlining the transition may prove challenging.
