CVS CVS Health Corporation

By Brent Kendall 

WASHINGTON -- A federal judge on Tuesday softened his previous suggestion that he would likely issue a court order requiring CVS Health Corp. to halt its integration of newly acquired insurer Aetna Inc.

U.S. District Judge Richard Leon in recent weeks has voiced concerns about the companies' settlement with Justice Department antitrust enforcers that allowed the nearly $70 billion deal to proceed.

The judge, who must decide whether to approve the settlement, earlier this month raised the prospect of requiring CVS to hold Aetna's assets separately for now, while he considers in more detail whether the settlement is in the public interest.

During a brief hearing in Washington, D.C., on Tuesday, the judge took a more conciliatory tone toward CVS, citing with approval a voluntary offer the company made to keep certain aspects of Aetna's operations separate for now.

CVS has argued that halting all integration would cause irreparable harm to the company and its customers. Instead, it offered four measures it said would help facilitate Judge Leon's review.

Among them, CVS pledged that Aetna would maintain its historical control over pricing, and that CVS and Aetna wouldn't exchange competitively sensitive information for the time being.

Judge Leon said CVS's proposal was constructive and helpful, and he suggested that an outside monitor be brought in to make sure that the company lives up to those commitments.

Both CVS and the Justice Department are due to file more court papers on Thursday.

DOJ approved the deal in October under the condition the companies sell Aetna's Medicare drug business to preserve competition. The companies sold those assets to WellCare Health Plans Inc., and CVS completed the acquisition last month.

Judge Leon has questioned whether the settlement did enough to protect competition in the health-care industry, citing objections raised by critics including the American Medical Association.

The Justice Department has said its settlement fully addressed the potential harms raised by the merger and that Judge Leon didn't have the authority to object to other parts of the transaction that the department didn't find problematic.

While the judge had kind words Tuesday for CVS, he said the department's legal filings were "unhelpful" and "intemperate," and he urged the government to change its tone.

Judge Leon and Justice Department antitrust lawyers have been at odds for months; the judge in June rejected the DOJ's challenge to AT&T Inc.'s acquisition of Time Warner. The department is appealing that ruling, arguing that Judge Leon's decision ignored "fundamental principles of economics and common sense."

CVS, for its part, has stressed that it and Aetna are no longer separate companies. "Our focus is on transforming the consumer health experience, " a CVS spokesman said. "The actions we've highlighted for the court make a hold-separate order unnecessary."

Judge Leon suggested it could take at least several months to fully review the settlement. CVS said in court that it was happy to abide by its voluntary commitments for six months, but may want to reconsider if the case takes longer to resolve.

Beyond Judge Leon's review, integration presents a challenging task for CVS because of the diverse and sprawling businesses involved in the Aetna deal. The combined company includes an insurance operation, a pharmacy-benefit manager and thousands of retail drugstores.

CVS has said it will trim costs and offer new, integrated services for consumers, partly by leveraging the huge store of data it can now assemble.

Clients including major employers, which make decisions about their health and pharmacy benefits many months in advance, will already be expecting to hear about the company's offerings for 2019, 2020 and beyond. They will also be closely watching for any signs of operational problems.

--Anna Wilde Mathews contributed to this article.

Write to Brent Kendall at brent.kendall@wsj.com

(END) Dow Jones Newswires

December 18, 2018 17:21 ET (22:21 GMT)

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