A $69 billion merger between CVS Health and Aetna that promises to transform the healthcare industry may be in trouble after a federal judge raised concerns Monday over the transaction’s anti-competitive effects.
U.S. District Judge Richard Leon, who previously ruled against the government’s challenge to the AT&T-Time Warner merger, warned that CVS may need to keep Aetna’s assets separate as he reviews the deal, according to the Wall Street Journal. That would be problematic since the two firms have already started integrating their operations.
The DOJ approved the transaction between the pharmacy benefit manager and insurer in October after Aetna agreed to sell its Medicare Part D business, but the consent decree resolving its procedural suit in the matter must still be approved by Leon. The judge said last week he wouldn’t “rubber stamp” it.
In expressing skepticism over the merger, Leon cited opposition from the American Medical Association, which previously warned that the deal would lead to higher premium and out-of-pocket costs for patients purchasing drugs, as well as reduce the quality of health insurance. CVS and Aetna have argued a combined entity would ultimately lower costs for consumers and improve adherence to drug-treatment plans.
“CVS Health and Aetna are one company, and our focus is on transforming the consumer health experience,” the company said in a statement late Monday.
Makan Delrahim, the Justice Department’s antitrust chief, attended the hearing on Monday but declined to comment on the proceedings, according to the Journal.
In court papers filed Sunday, however, the department opposed Leon’s initial suggestion late last week that the companies’ assets be kept separate. The court’s authority in the matter rests on Justice’s decision to bring a suit in the first place, the agency said, and it extends only to reviewing the agreement that was reached.
The Tunney Act, the 1974 law requiring courts to review Justice Department decisions in antitrust cases, doesn’t give judges leeway to “effectively redraft the complaint” to address matters the agency chose not to pursue, attorneys in the antitrust division wrote.
Further, the law doesn’t bar companies from completing a merger until the judge approves the Justice Department settlement, the agency argued, and its attorneys still believe keeping their assets separate isn’t necessary.
CVS fell 0.9 percent to $79.52 in New York trading on Monday. CVS, Aetna and the federal government are due back in court on Dec. 18, according to the Journal.
