AMA urging DOJ to block CVS-Aetna merger
The American Medical Association distributed the following press release on August 8…
The American Medical Association (AMA) today urged the U.S. Department of Justice (DOJ) to block the proposed acquisition of Aetna, Inc. by CVS Health Corporation, and shared with federal regulators an exhaustive AMA analysis indicating the proposed merger would likely substantially diminish competition in many health care markets to the detriment of patients.
“The CVS-Aetna deal is popularly described as a vertical merger involving two companies that don’t operate in the same markets,” said AMA President Barbara L. McAneny, M.D. "But in fact, CVS and Aetna do operate as rivals in some of the same markets, raising substantial concerns that are specific to horizontal mergers. A merger of these two rivals would risk a substantial reduction of competition in the stand-alone Medicare Part D prescription drug plan market and the pharmacy benefit management (PBM) services market.”
The 29-page analysis compiled by the AMA noted that the merger is expected to increase premiums due to an increase in market concentration in 30 of 34 Medicare Part D regional markets. In 10 of 34 Medicare Part D regional markets, the deal would exceed a threshold set by federal antitrust guidelines for a merger that should be presumed likely to enhance market power. According to the DOJ, “a merger enhances market power if it is likely to encourage one or more firms to raise price, reduce output, diminish innovation, or otherwise harm customers as a result of diminished competitive constraints or incentives.”
The AMA analysis also notes that Aetna and CVS each have their own share of the highly concentrated market for PBM services. According to the AMA, the combined impact of the proposed merger on the PBM services market raises significant competitive concerns under federal antitrust guidelines. With the acquisition of Aetna the PBM market would lose a national health insurance company with an established brand, a significant customer base, expertise, capital, and years of experience as a major player in the PBM market.
In addition to the extensive anticompetitive concerns generated by horizontal aspects of the merger, the AMA urged the DOJ to challenge the deal because the vertical ramifications of the merger violate federal law. Since CVS and Aetna already operate in concentrated or highly concentrated markets, the AMA expects the proposed merger would increase barriers to market entry and foreclose competitors.
“There is every indication that extensive vertical integration resulting from the proposed merger would raise prices, reduce choice and stifle innovation in markets for PBM services, health insurance, retail pharmacy, and specialty pharmacy,” said Dr. McAneny.
The AMA also urged the DOJ to beware of vague and speculative efficiency claims that would not outweigh the anticompetitive effects of the proposed merger. As an example, the AMA analysis notes the alleged consumer benefits from combining CVS’ pharmacy data with Aetna’s medical data. However, Aetna already performs its own core PBM functions and already integrates pharmacy and medical data to lower health care costs. According to the AMA analysis, “the alleged principal efficiency justification for the merger is nonexistent.”
To ensure patients are better served by dynamic and competitive health care markets, the AMA will urge state regulators to review the analysis presented to the DOJ and continue to persuade state and federal officials to oppose the CVS-Aetna merger.
Click for AMA analysis/DOJ letter
Click for AMA analysis/DOJ letter attachment