Tuesday, 25 June, 2019

Health Care ETFs Retreat on DOJ Approval of Aetna-CVS Merger

CVS Health President and CEO Larry J. Merlo gives an interview on the floor of the New York Stock Exchange CVS Health President and CEO Larry J. Merlo gives an interview on the floor of the New York Stock Exchange Thomson Reuters
Gustavo Carr | 13 October, 2018, 15:41

Pharmacy chain CVS Health Corp (CVS.N) won US antitrust approval for its $69 billion acquisition of health insurer Aetna Inc (AET.N), the Justice Department said on Wednesday, paving the way for a combination with potential to cut USA healthcare costs for consumers.

To help seal USA approval for the deal, Aetna last month agreed to sell its Medicare drug plans to WellCare Health Plans Inc., to alleviate concerns that a takeover by CVS would otherwise harm competition among plans that sell pharmaceutical coverage to seniors. Aetna will continue to provide administrative services and retain financial results for the plans through 2019.

In December CVS announced its desire to buy Aetna for $69 billion in both stock and cash.

Critics of the CVS-Aetna deal had anxious that the merger could lead to higher drug prices for Medicare Part D beneficiaries.

CVS Health, Corp shares were unchanged in after-hours trading Wednesday. Although mergers such as the CVS-Aetna deal offer the promise of potential cost-savings and patient benefits, health advocacy groups have raised concerns about the long-term impact on pharmacies and patients.

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One case has also been confirmed in Wisconsin. "This is certainly the largest outbreak of enterovirus A71 we've seen in Colorado". The CDC has recorded 362 official cases of acute flaccid myelitis in the USA between August 2014 through August 2018.

Aetna's agreement to sell its Medicare prescription-drug business, in order to get clearance for the merger with CVS, was part of a settlement reached with the Justice Department and five state attorneys general, including California's. Ana Gupte, equity analyst at Leerink Partners, said in a Wednesday research note that Guertin's exit, combined with the previously announced departure of CVS CFO David Denton "could pose some challenges given the complexity of the pricing and underwriting in the (Aetna) business amid the considerable integration challenges".

Aetna President Karen Lynch will stay on as president of the business unit, and Aetna CEO Mark Bertolini will join CVS' board of directors.

"CVS Health and Aetna have the opportunity to combine capabilities in technology, data and analytics to develop new ways to engage patients in their total health and wellness", Merlo said.

CVS and Aetna executives faced tough questioning from CT regulators last week about the necessity for the merger. "We now urge the DOJ and state antitrust enforcers to monitor the post-merger effects of the Aetna acquisition". Jones, however, does not have direct regulatory approval over the deal. (Amazon chief executive Jeff Bezos also owns The Washington Post.) And the company is partnering with Berkshire Hathaway and J.P. Morgan on a venture to reduce costs in the health-care industry by targeting middlemen.

It would have also harmed California's most vulnerable populations, seniors ages 65 and over and people with disabilities, by reducing options and increasing healthcare costs, Becerra said. Aetna had allegedly mailed notices regarding HIV medications to roughly 12,000 individuals across the country using envelopes with large windows, allowing the patients' HIV status to be revealed, according to the state officials. The deal is expected to close at the end of this year.