CVS, Aetna Deal Could Cause Antitrust Issues

A recent report released by the American Antitrust Institute (AAI) alerted the Department of Justice (DOJ) that the proposed merger of CVS and Aetna would hurt consumers and the health care industry.

The AAI report warned the DOJ that the deal would combine the nation’s largest pharmacy benefit manager and pharmacy retailer with the third largest payer.

“AAI writes to express concern that the proposed merger of the retail pharmacy chain/PBM CVS Health and health insurer Aetna will potentially harm competition and consumers,” the wrote. “This letter adds to the concerns raised by other important voices, including the American Medical Association (AMA) and Consumers Union.”

The AAI report noted that the deal would enhance the incentive for CVS and Aetna to exclude rivals from services, and could lead to anticompetitive practices between the PBM, CVS Caremark, and the payer, CVS Aetna. 

“CVS and Aetna already wield significant market power in the retail pharmacy, PBM, and health insurance markets,” they wrote. “High concentration in these markets exacerbates competitive concerns.”

The report noted that previous challenges of mega horizontal mergers in this space highlight the need for increased scrutiny. AAI argued that this vertical merger would have similar effects. 

“The DOJ’s successful challenges to the Anthem-Cigna and Aetna-Humana mergers highlight this issue, as does a Council of Economic Advisers report that concludes that drug pricing suffers from high concentration in the PBM market,” they wrote. “Market idiosyncrasies heighten the proposed merger’s potentially anticompetitive effects. These include the role of health insurers in paying for most prescriptions filled and of PBMs in managing the flow of prescription drugs to millions of Americans, and PBM markets that lack important transparency.” 

AAI also argued that the recent announcement of the merger of Cigna and Express Scripts would both replicate and exacerbate this issue if approved by the DOJ.

“Together with the merger of Express Scripts-Cigna, CVS-Aetna would trigger a fundamental restructuring of the U.S. healthcare system. Stronger incentives to exclude rival PBMs and health insurers and to engage in anticompetitive coordination would harm competition and consumers at all levels,” they wrote. “Assuming both mergers move forward, the three large integrated PBM-insurer systems (i.e., CVS-Aetna, Express Scripts-Cigna, and Optum Rx-United Healthcare) that would dominate the markets would have weak, if any, incentives to compete.”

—David Costill