The US Department of Justice (DOJ) has conditionally approved the $69bn merger between retail pharmacy and health care company CVS Health and health insurer Aetna.
Aetna headquarters in Hartford, Connecticut. Photo: courtesy of Sage Ross/Wikipedia.org.
The department wants Aetna to divest its Medicare Part D prescription drug plan business for individuals in order to move ahead with the closing of the merger.
It said that the proposed sale of the business to WellCare Health Plans, a health insurer focused on government-sponsored health plans, would completely resolve its competition concerns.
According to DOJ, CVS Health and Aetna are major competitors in the sale of Medicare Part D prescription drug plans to individuals, which put together cater to 6.8 million members throughout the US.
As per its complaint, the combination of CVS SilverScript Medicare Part D individual prescription drug plans with that of Aetna’s would create anticompetitive effects, including inflated prices, inferior customer service, and reduced innovation across sixteen Medicare Part D regions covering 22 states.
Justice Department antitrust division assistant attorney general Makan Delrahim said: “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.
“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.”
Aetna had previously signed an asset purchase deal with a subsidiary of WellCare Health Plans to sell its standalone Medicare Part D prescription drug plans, which have a total of nearly 2.2 million members.
CVS Health said that the clearance from DOJ, which is subject to the asset sale, takes it closer to wrapping up the merger deal with Aetna.
CVS Health president and CEO Larry Merlo said: “DOJ clearance is an important step toward bringing together the strengths and capabilities of our two companies to improve the consumer health care experience.
“We are pleased to have reached an agreement with the DOJ that maintains the strategic benefits and value creation potential of our combination with Aetna. We are now working to complete the remaining state reviews.”
CVS Health said that its acquisition of Aetna continues to be on track for a completion in early Q4 2018.
As per the deal signed in December 2017, CVS Health will own about 78% in the combined entity following the closing of the merger, while Aetna will own the remaining 22% stake.