CVS-Aetna Merger Approved With Conditions, As California Seeks Stronger Oversight

Today, the U.S. Department of Justice approved the merger of CVS Health and Aetna, continuing the trend of “diagonal” mergers, and the further consolidation of mega-health care corporations. CVS, a major pharmacy chain and one of the nations largest independent pharmacy benefit managers (PBM), and Aetna, one of the nations largest insurers, consolidates the health industry further. While consumer advocates appreciate the conditions imposed on the merger, including the divestment of Aetna’s Medicare Part D business, Health Access is concerned about the further consolidation of the industry, Aetna’s dubious corporate record, and is skeptical about any potential benefit for the 14 million Californians in private coverage.

While executives tout the benefits of mergers, history has shown that bigger is not often better for consumers. Rarely do these mergers result in lowered costs or better access or quality of care. While we appreciate the conditions on the merger including the divestment of Aetna’s Medicare Part D business, we are still concerned about the deal’s impact on our already consolidated health system. Aetna has repeatedly pursued unreasonable rate increases and have failed to abide by basic consumer protections. CVS has offered no information on how it would correct any of their problematic practices by Aetna after they merge. This deal gives more power to bad actors without all the necessary conditions to protect consumers.

Nationally, there are only five competing major insurers, and health insurance markets are already highly consolidated. Although California has a relatively more competitive insurance market, three companies control nearly 80% of the market and our top five insurers control over 90% of the market. As a result, any mergers involving major insurers are likely to result in fewer choices and higher prices for the 14 million California consumers enrolled in private coverage. Private insurance premiums and out-of-pocket spending are high and projected to grow. Health insurance premiums for family coverage have seen a cumulative 216% increase since 2002, compared to a 37% increase in overall prices.

California’s Department of Managed Health Care (DMHC), which regulates coverage for 96% of covered lives in California, is currently reviewing the CVS-Aetna merger to assess it’s impacts on California’s health care market. The California Legislature and Governor Brown passed AB 595 by Assemblymember Wood this year which would institute stronger state oversight over health plan mergers and protects Californians from changes to the health plan market that may lead to higher health costs. The law will take effect on January 1, 2019 and will apply to any merger still under review at DMHC.

The Legislature and Governor Brown also enacted AB 315 by Assemblymember Wood which increases oversight to pharmacy benefit managers like CVS Caremark. These PBMs serve as intermediaries between purchasers such as health plans and drug manufacturers, and negotiate lower drug costs through rebates, discounts, and other price concessions. Though they play a large role in designing drug cost sharing, they are not licensed or regulated. By regulating PBMs and requiring disclosure of information on rebates and discounts, this new law will help ensure that consumers and purchasers actually benefit from savings that are reaped by PBMs. AB 315, along with AB 595, would strengthen California’s role in ensuring these large health care corporations are acting in the best interest of patients and the public.

As this merger steams ahead, we applaud the efforts by California policymakers to increase the oversight on health mergers in general, and with pharmacy benefit managers in specific. These deals have major impacts on the health care system we all rely on–effecting what choices we have and what we pay. We need a stronger voice for patients and the public interest, beyond the interest of health industry executives.

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