Federal Judge Wraps Up Hearings Into CVS-Aetna Deal
June 06 2019 - 7:45PM
Dow Jones News
By Tom Burton
WASHINGTON -- Two days of unprecedented court hearings on CVS
Health Corp.'s acquisition of Aetna Inc. wrapped up without a firm
date for when a federal judge would rule on a Justice Department
settlement that allowed the deal, and legal uncertainty for the
merged firm could last well into the summer.
Judge Richard Leon heard testimony this week on the nearly $70
billion merger in a proceeding he decided to conduct after
reviewing the terms of the October settlement between the two
companies and the Justice Department that allowed the deal to go
through. Judge Leon has said he is concerned the settlement doesn't
do enough to protect consumers, including those who purchase
medication under the federal drug plan known as Medicare Part D.
CVS and Aetna had been competitors in that business.
He said he would accept final briefs and then hear closing
arguments from supporters and opponents of the deal in July.
Witnesses for medical and consumer groups told the judge that
the terms of the settlement would lessen competition and hurt
consumers.
A major focus of the hearing has been whether a CVS plan to sell
Aetna's Medicare Part D business to WellCare Health Plans Inc.
would sufficiently bolster competition and protect consumers.
Diana Moss, president of the American Antitrust Institute,
testified on behalf of consumer groups that "premiums will increase
as a result of consolidation" of CVS and Aetna. "Sometimes, the
most effective remedy is for the government to move to block a
merger," she said.
Dr. Neeraj Sood, an economist testifying for the American
Medical Association, said there are "significant competitive
concerns" with the Justice Department's settlement allowing the
merger.
"The public here is really vulnerable," said Dr. Sood. The
divestiture to WellCare would lead to far less competition in
Medicare drug plans than existed before the merger, he said, adding
that many patients in the plan are low-income and have numerous
ailments.
Terri Swanson, Aetna's vice president of Medicare products,
disputed that assessment. Speaking on behalf of both companies and
the Justice Department, Ms. Swanson said WellCare had "the most
successful prescription-drug plan this year." In fact, she said,
WellCare has been so competitive that it is expected to roughly
double in size, to about 4 million members by the end of this
year.
CVS executive vice president Alan Lotvin testified that the
company's acquisition of Aetna has allowed the combined company to
start innovative programs to treat chronic disease that can
ultimately result in lower premiums for its customers.
CVS and Aetna closed the deal in November, and they said the
combination of CVS's pharmacies and pharmacy-benefit management
business with Aetna's health insurance would lead to more efficient
care for consumers.
The hearing comes as focus on competition is intensifying. The
Wall Street Journal reported Friday that the Justice Department's
antitrust division is gearing up for an investigation of Alphabet
Inc.'s Google unit. At the same time, the Federal Trade Commission
is considering a similar inquiry of Facebook Inc., and House
Democrats are launching their own hearings.
While a law called the Tunney Act stipulates that the government
must get merger settlements approved by a federal court, that
process normally is fairly routine. Judge Leon, though, is known
for going his own way in his courtroom.
It isn't clear what would happen next if Judge Leon rejects the
settlement. CVS already has sold the assets the Justice Department
required it to divest, and the company has contractual obligations
with WellCare to fulfill the terms it agreed upon with the
government.
At the end of the two days of testimony, a Justice Department
lawyer said there had been multiple misstatements of facts and
asked the judge to allow for more witness testimony. The judge
replied, "This is not a trial. You seem to have a hard time
understanding the distinction."
Write to Tom Burton at tom.burton@wsj.com
(END) Dow Jones Newswires
June 06, 2019 19:30 ET (23:30 GMT)
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