Despite opposition from doctors and an increasingly complicated regulatory landscape, CVS Health reaffirmed Wednesday its intention to complete the $69 billion acquisition of insurer Aetna, for which federal approval is pending.
The American Medical Association and California’s insurance commissioner earlier this year urged the Trump administration to halt the deal. Media reports in July, however, suggested the Department of Justice would not seek to block it. In its latest earnings report, CVS said the agency is still reviewing the transaction after a second request for information in February.
The Woonsocket, R.I.-based pharmacy chain is prepared “for a seamless integration of CVS and Aetna with one goal: to transform the consumer health care experience and, by doing so, deliver long-term profitable growth for shareholders,” Chief Executive Officer Larry Merlo said in a statement.
The CVS-Aetna merger would give the insurer access to the pharmacy chain’s benefit manager, known as CareMark, even as activist investor Carl Icahn tries to sink a similar transaction between insurer Cigna and pharmacy benefit manager Express Scripts.
The business model of such managers has become a focus of the Trump administration, with health officials calling for an end to the lucrative drug rebate program under which firms often receive a percentage of the negotiated subsidy.
Pfizer’s top executive previously charged that pharmacy benefit managers take as much as a 40 percent subsidy. Merlo argued those estimates were greatly exaggerated.
“The idea that rebate retention is correlated with higher drug prices is entirely false,” he told investors. “Competition among PBMs means more and more rebates are going and will continue to go back to clients.”
Merlo said the company has had “productive engagement and discussions” with the administration, but stopped short of confirming any direct conversations with President Donald Trump.
Despite the intense rhetoric Trump has levied at the industry, Merlo said he believes the administration acknowledges the role that the benefit managers play and as evidence pointed to a recent decision by the Department of Health and Human Services to allow further drug price negotiations in the Medicare Advantage program — an action that Merlo said could prove financially beneficial for a combined Aetna-CVS Health.
“It picks up a component of the business that has largely been isolated,” he told investors on the company’s earnings call.
E-commerce giant Amazon, meanwhile, is plotting its first major foray into the pharmacy business. Its acquisition of drug delivery service PillPack has investors concerned that it will quickly dominate the market.
Revenue at CVS Health’s pharmacy decision increased 2.8 percent to roughly $33.2 billion in the three months through June, while overall sales rose 2.2 percent to $46.7 billion. The company reported a $2.56 billion loss after writing down the value of its long-term care business.
