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Justice Department Blesses CVS-Aetna Deal

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The U.S. Department of Justice today agreed to clear any federal antitrust barriers to CVS Corp.’s proposed $69 billion acquisition of Aetna Inc., if Aetna goes ahead with a previously announced agreement to sell its individual stand-alone Medicare Part D prescription drug plan program to WellCare Health Plans Inc.

The department posted copies of a consent decree and other documents that show what Aetna has to divest to resolve antitrust division objections to the CVS deal.

In addition to sell the individual Medicare drug plan operation to WellCare, Aetna must let WellCare hire the key employees associated with that operation; help WellCare operate the business during the transition; and work with the Centers for Medicare and Medicaid Services to develop a process for transferring its 2.2 million drug plan enrollees into the WellCare plans.

(Related: Dear Connecticut: CVS Can’t Afford Aetna. Sincerely, New York)

CVS and Aetna said in their announcements about the consent decree that the decree lets them complete their deal before Aetna completes the deal with WellCare.

Copies of the documents are available here.

CVS and Aetna said they expect to complete the deal “in the early part of the fourth quarter of 2018.” The fourth quarter started Oct. 1.

CVS is a large, Woonsocket, Rhode Island-based provider of pharmacy and pharmacy benefit management (PBM) services. It also offers Medicare Part D drug plans, and it operates a large network of retail health care clinics in its stores.

Aetna, which is based in Hartford, Connecticut, has been a major provider of commercial health coverage and Medicare plan coverage.

The antitrust ruling means that the biggest remaining obstacle to completion of the CVS-Aetna deal is the need for the parties to get the approval of Katharine Wade, the Connecticut insurance commissioner.

The companies also need to clear the deal with New York state insurance regulators.

What will Connecticut do about the CVS-Aetna deal?

New York state insurance regulators have told Wade that they believe CVS is taking on too much debt to pay for Aetna, and that the debt burden could hurt the quality of Aetna coverage and increase the cost of Aetna coverage.

The Connecticut Insurance Department held a hearing on the deal Thursday.

CVS pleased many in Connecticut by pledging to keep Aetna’s headquarters in Connecticut for at least 10 years.

Timothy Curry, Connecticut’s deputy insurance commissioner, said at the hearing that he believes the department has received enough information from the parties about the debt issue to proceed with making a decision.

The department is still considering a variety of other objections to the deal, expressed either in the form of written comments or in oral testimony at the hearing.

Representatives from the American Medical Association, Consumers Union, the Connecticut State Medical Society and the Connecticut Pharmacists Association have said that they think the CVS-Aetna deal would be bad for consumers, and bad for health care or pharmacy services providers that have to compete with CVS.

Nathan Tinker, the chief executive officer of the Connecticut Pharmacists Association, said at the hearing that he believes opposition to the CVS-Aetna deal is unpopular in Connecticut.

But “we strongly oppose the merger,” Tinker said.

Tinker said his group believes the deal would “drive independent pharmacies out of business.”

Charles Bell, who appeared at the hearing on behalf of Consumers Union, said his group believes the deal will lead to a round of “health care Pac Man” that will create new health care oligopolies.

CVS and Aetna are saying their deal will create savings, but they have not made any firm commitments to passing those savings on to the health plan members, Bell said.

A copy of the Connecticut hearing video is available here.

The Connecticut deal docket, which offers access to many deal-related documents, is available here.

— Read 3 Possible CVS-Aetna Deal Effects, for Agentson ThinkAdvisor.

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