The retail pharmacy giant announced Dec. 3 that it had agreed to purchase Aetna, one of the country’s largest health insurers, for about $69 billion. Because CVS of Woonsocket, Rhode Island, and Aetna Inc., of Hartford, Connecticut, do not operate in exactly the same industry, the former’s planned takeover of the latter is a so-called vertical merger, which traditionally have fared better under Washington’s scrutiny, the lawyers said.
A recent event may belie that trend, though: Last month, the U.S. Department of Justice sued AT&T to block its merger with Time Warner—the first time in at least 40 years that the agency has attempted to block a vertical merger. The government’s complaint alleges that AT&T would hinder its rivals by forcing them to pay more per year to distribute Time Warner content.
“Vertical transactions are generally considered to raise less antitrust concerns than horizontal ones, deals where the merging parties actually compete against each other, but vertical transactions can raise significant antitrust concerns, so the combination will likely prompt regulatory concern,” said Andre Barlow, an antitrust lawyer at Washington’s Doyle, Barlow & Mazard.
Chief among those reasons, Barlow said, is the sheer size of the consolidation within the health care industry, one of the most important to the U.S. economy.
Aetna serves an estimated 44.6 million subscribers, according to the company. CVS Health has 9,700 retail pharmacies and more than 1,100 walk-in medical clinics. It is one of the largest pharmacy benefits managers with nearly 90 million plan members, as well as a senior pharmacy care business serving more than 1 million patients per year, and a stand-alone Medicare Part D prescription drug plan.
“It’s logical to anticipate [close scrutiny] based on the size and importance of the industry as it relates to the U.S. economy and well-being,” said Shannon Zollo, corporate partner at Boston-based law firm Morse, Barnes-Brown & Pendleton.