CVS Health tells judge a monitor is not necessary during review of Aetna merger

CVS Health said Thursday that a government appointed monitor is unnecessary and the cost would outweigh any benefits, in response to a court-appointed deadline to a federal judge's request for such a monitor.

During a hearing held this week, U.S. District Court Judge Richard Leon asked both parties to explain, by Thursday, why it wouldn't be necessary to have a monitor oversee four steps that CVS Health voluntarily committed to while he conducted a full review of the merger under the antitrust Tunney Act.

Leon said the monitor would report back to the court every 90 days on the status of four provisions CVS had outlined in a brief filed with the court last week: that Aetna operate its health insurance business independently from CVS's retail pharmacy and pharmacy benefit manager; that Aetna set its own pricing and product offerings; that Aetna employees maintain their current compensation and benefits; and that CVS keep up a firewall to prevent the exchange of sensitive data between it and Aetna.

CVS said it voluntarily committed to the four steps that are modeled on provisions negotiated between the DOJ and AT&T during an appeal of the Time Warner merger decision, though the court did not impose a monitor in that case.

"... And one is not necessary here," CVS said.

The costs and burden of a monitor would outweigh any benefits, CVS said.

"CVS's voluntary steps make a monitor unnecessary," the company told the court.

CVS said it was already maintaining a separation of the two companies, such as the firewall between sensitive data.

CVS's attorney Attorney Enu Mainigi of Williams & Connolly said the company has committed to voluntarily filing quarterly declarations with the federal court certifying under oath that each of four steps is taking place.

If CVS wants to modify or end one of the commitments, it would give  the court 30 days' notice and an explanation of the reasons for the proposed changes before implementation.

The Department of Justice said in a separate letter to the court that it had no objection to these voluntary commitments.

THEIR TAKE

"CVS reiterates that it is fully committed to assisting the court in the Tunney Act process, and it has demonstrated that commitment through its voluntary undertakings. In these circumstances, the court should accept CVS's assurances, bolstered by quarterly sworn declarations, without issuing a formal order or imposing the burdens of a monitor."

WHAT'S HAPPENING

Leon's questioning of the merger has come as somewhat of a surprise, as a federal judge's review is usually procedural after the DOJ has approved the merger.

All other federal and state approvals are in place.

Technically, the federal judge has the authority to clear the  settlement agreement the DOJ approved in October, but he cannot block the merger outright.

After Tuesday's hearing when Leon ordered a review, the DOJ said it would take until February to respond to complaints by the AMA and others over the merger, according to the New York Post.

AMA, PHARMACIST CONCERNS

Several pharmacy associations, as well as the American Medical Association, have urged Leon to block the $69 billion merger.

The judge has denied motions for pharmacist groups to participate as interveners or advisors in the case. Leon said that, beyond submitting written briefs, the Consumer Action and U.S. PIRG (ECF #34) and Pharmacists United for Truth and Transparency and Pharmacists Society of the State of New York, may not intervene or participate in the case.

PUTT Executive Director Monique Whitney said they were granted amicus status to participate in the hearing and have been actively doing so since Tuesday.

At issue for the court and opponents of the deal is whether the Department of Justice did enough to address the antitrust and anti-competitive concerns of the consolidation before approving the merger with the condition that Aetna divest of its Part D Medicare drug business.

Aetna divested its plans to WellCare within days of the November 28 closing and CVS Health said at the time that the integration of the two companies had begun while some aspects of the business remained separate.

PART D CONCERNS

WellCare uses CVS Caremark, CVS's in-house pharmacy benefit manager, to administer the Medicare Part D portion of its business.  As CVS is among the largest holders of Medicare Part D business, the sale of Aetna's Medicare Part D business to WellCare only serves to maintain CVS' market share and render the point of the spin-off useless, said Teresa Dickinson in a December 14 letter to Judge Leon.

Dickinson is an independent pharmacy owner in Phoenix, Arizona and president of Pharmacists United for Truth and Transparency, a coalition of more than 1,200 independent and community pharmacies.

CVS, Express Scripts and OptumRx control nearly 80 percent of all prescriptions filled in the U.S. All three are either owned, or poised to be owned, by large health insurance companies which serve as the gatekeeper between patients and pharmacy, medical providers and other sectors of the healthcare system, Dickinson said.

CVS claims it maintains a "firewall" between its pharmacies and its CVS Caremark PBM, yet CVS routinely sends letters to independent pharmacy patients stating that if the patient doesn't switch to a CVS pharmacy his or her medication cost share will increase, Dickinson said. CVS also offers deals such as lower prescription copays to incentivize patients to switch to a CVS pharmacy, but strictly prohibits other pharmacies from doing so under threat of legal action, she said.

"Past acquisitions have enabled CVS to restrict consumer access and force them to use more expensive drugs. That's why the California Commissioner of Insurance, major consumer groups such as Consumers Union, the American Antitrust Institute, and the American Medical Association--the nation's largest group of health care providers--all stated the merger should be blocked," Dickinson said.

CVS is a powerful pharmacy benefits manager that is destroying neighborhood pharmacies, said Ray Macioci of FixRx, a campaign launched in November by the New York City Pharmacists Society and the Pharmacists Society of the State of New York.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com