Private Payers News

CVS Health-Aetna Merger Sealed, WellCare Takes Aetna’s Part D PDP

Judge Leon found that divesting Aetna’s Medicare Part D prescription drug plan to WellCare was within the reaches of public interest, finalizing the CVS Health-Aetna merger.

CVS Health, Aetna, WellCare, Part D, PDP, prescription drug plan, merger

Source: CVS Health

By Kelsey Waddill

- Judge Richard Leon granted the settlement between the federal government and CVS Health, which divests Aetna’s Medicare Part D prescription drug plan (PDP) to WellCare.

The judge stated that the amici briefs opposing the settlement did not prove that the consent settlement could or would hamper costs and competition.

“Although amici raised substantial concerns that warranted serious consideration, CVS's and the Government's witnesses, when combined with the existing record, persuasively support why the markets at issue are not only very competitive today, but are likely to remain so post-merger,” Judge Leon wrote. “Consequently, the harms to the public interest amici raised were not sufficiently established to undermine the Government's conclusion to the contrary.”

When the government challenged the CVS-Aetna merger, it immediately proposed a consent judgment, which would settle the dispute by having Aetna divest its PDP business to WellCare. The court disapproved of the government’s responses to public comments on this proposal, finding them lacking in evidence. Judge Leon convened a hearing that brought together CVS Health, the government, and the amici curiae (amici) who opposed the settlement.

In the final consent judgment, Judge Leon demonstrated how amici failed to support their three major points and that CVS Health and the government, in contrast to their public comment responses, strongly responded to amici with evidence.

READ MORE: Recent CVS-Aetna Merger Hearings Signal Challenges Ahead

Amici argued that Aetna would still diminish the consumers’ PDP options, which was the government’s original complaint and the reason behind their proposal to turn over the PDP to WellCare.

Amici used the Herfindahl-Hirschman Index (HHI) to show that Aetna still held the power in the PDP market and that the divestiture to WellCare would not rectify this. In fact, studies indicate that higher concentration would lead to higher premiums, amici asserted.

In response, CVS and the government argued that the PDP market is not only competitive, but strongly so. One witness, Terri Swanson, an Aetna vice president, head of Aetna’s Medicare Part D, pointed to the CMS Medicare Plan Finder which compares PDP plans in detail, making brand name less important than affordability and product.

Furthermore, she noted, WellCare was taking consumers from major payers, including Aetna, by underselling them. This is a pattern that Judge Leon concluded would continue after the divestiture.

CVS responded specifically to amici’s use of HHI, saying that HHI reveals what is possible in terms of market concentration. This does not indicate what the current status or definite future holds.

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Amici’s second major argument was to consider the harm that concentration in the PDP market would have on other markets such as the pharmacy benefit managers (PBMs).

Because CVS is such a powerful player in the PBM industry, the company could force rivals, including WellCare, to raise their prices making healthcare unaffordable for consumers.

However, CVS revealed that it currently finds it a challenge to keep its PBM clients. The company loses PBM business when rivals offer more attractive pricing or when clients choose to establish in-house PBMs. Furthermore, for PBM contracts, clients can conduct “market checks” while a contract is ongoing, to ensure that their PBM’s pricing is fair.

Being such a major player in the PBM industry, CVS would not risk losing its lucrative PBM business by escalating prices.

Lastly, amici pointed to members with HIV and AIDS as populations likely to suffer under this new settlement.

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HIV and AIDS treatments are so delicate in their complexity and reliance on medication adherence that, should the proposed arrangement force patients to shift providers, the results could be endangering.

Judge Leon dismissed this argument by saying that amici did not prove this would occur with the settlement, only that if it did it would produce harm.

The final verdict may come as a surprise to those who recall Judge Leon’s position early on in the process. He enjoined the two companies to remain separate until he determined whether they should be allowed to operate as a combined company while the settlement was being finalized. Ultimately, he agreed to allow them to act as one company, however, the tension between the government’s lawyers and the judge was particularly evident.

According to the Tunney Act, Judge Leon’s position in a consent judgement is to determine that the settlement is “within the reaches of public interest.” The companies and amici each had four hours for three witnesses to convince Judge Leon that the settlement was either in favor of or against the public’s interests. Ultimately, CVS Health and the government were successful.