Nearly a year after news broke that CVS and Aetna would merge for $69 billion, the Department of Justice officially approved the move on Oct. 10.
The catch? That Hartford-based Aetna moves forward with its decision to sell prescription drug plan company Medicare Part D.
The settlement will next require a judge's approval, which will conclude the deal if received. Once sealed, the "game-changing" merger will be the largest health insurance deal in history.
"DOJ clearance is an important step toward bringing together the strengths and capabilities of our two companies to improve the consumer health care experience," said CVS Health President and Chief Executive Officer Larry J. Merlo in a press release announcing the DOJ's approval. "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."
The DOJ's announcement in the midst of a flurry of health care deals, Ars Technica notes, citing the DOJ's approval of the Cigna/Express Scripts $67 billion merger, UnitedHealth Groups' 2017 announcement that it would spend $4.9 billion buying DaVita’s primary and urgent care services and Walgreens and LapCorp's forthcoming partnership.
When the merger was leaked last October, many analysts considered the move a smart one in light of Amazon's (then potential, now actual) overtures in the pharmaceutical landscape.
However, when the deal moved from “potential” to “actual” status, other analysts argued that the acquisition is a bit more than just a reactionary measure.
“Aetna CEO Mark Bertolini and CVS CEO Larry Merlo are both visionary business leaders, who are trying to break out of the traditional confines of their respective businesses,” Alan Murray wrote in a 2017 edition of Fortune’s CEO Daily newsletter. “With action in Washington on health care stalled, they believe they can forge a new model for the industry that can both improve health outcomes and reduce health care costs — something the government has repeatedly failed to do.”
Others penned think pieces on how the acquisition could be a considerable boon for consumers’ health care in the long term, with the New York Times arguing that “research shows that coordinating pharmacy and health benefits has value because it removes perverse incentives that arise when drug and nondrug benefits are split across organizations.”
Not everyone has agreed.
“Competition requires small buyers and sellers, and bigger insurers and benefits may combine as a way to find and leverage higher profits and reduce pressures for lower prices,” said Alan Sager, professor of health law, policy and management at Boston University’s School of Public Health, in a Boston Herald report. “By allowing large companies to merge and get bigger, it makes them more powerful bullies.”
Regardless, the merger will help Woonsocket-based CVS achieve more of its goals. Wrote Shannon Shallcross, CEO of BetaXAnalytics, in 2017:
“The company has expressed the desire for this move to improve the integration of patient care, and to provide higher quality care at a lower cost in ‘communities, homes and through the use of digital tools to support health,'” she said. “Merlo communicated the desire to put customers ‘at the center of health care delivery.’ The intent would be to leverage CVS’s 9,700+ retail stores and 1,100 Minute Clinics to create community-based centers that include resources for wellness, medical, pharmacy, vision, hearing and nutrition services. And the touted benefit of acquiring Aetna is that integrated care and higher negotiation power for pharmaceutical drugs is the key to lowering costs.”
Moving forward, CVS will stay in Rhode Island and Aetna will stay in Connecticut, its home since 1853.
