California commissioner calls for CVS, Aetna merger to be blocked

California insurance commissioner Dave Jones has urged the US Justice Department to block the merger between CVS and Aetna.

In December 2017 US drugstore operator CVS Health agreed to buy health insurer Aetna for a total value of $77 billion as it plans to push down costs.

CVS described the impetus for the vertical merger as an opportunity to take costs out of the healthcare chain, relying in part on lower cost treatment/consulting opportunities within the retail store network as well as the use of big data to prevent unnecessary hospital re-admissions, the analysts noted.

Jones warned that the proposed merger would have significant anti-competitive impacts on American consumers and health care and health insurance markets.

Jones found that the proposed merger poses competitive concerns in the Medicare Part D market, where both companies currently compete, as well as in the highly-concentrated market for Pharmacy Benefit Manager (PBM) services, and in the retail pharmacy market. These anti-competitive impacts pose a risk of higher costs for California consumers.

"The proposed merger of CVS and Aetna will significantly reduce competition in the PBM and Medicare Part D markets, affecting millions of health care consumers throughout the country," Jones said. "A merger of this size and type, according to experts on health insurer and health care mergers, will likely lead to increased prices and decreased quality. Further, partial divestiture or other remedies traditionally used by the Department of Justice will not adequately protect consumers or address the adverse consequences of a merger of CVS and Aetna. Traditional methods to avoid market concentration will not address potential impacts on service quality, the power to charge excessive rates, or the creation of barriers to block a potential market participant with the resources to enter into new markets,” Jones added.

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