California Insurance Commissioner Dave Jones is asking federal regulators to block a pending $69 billion CVS-Aetna merger.
In a letter (PDF) to Makan Delrahim, assistant attorney general of the antitrust division at the Department of Justice (DOJ), Jones cited specific concerns over consolidation in the Medicare Part D and pharmacy benefit management markets.
“Applying the analysis typically used by the United States Department of Justice and the Federal Trade Commission, the merger will substantially enhance market concentration and power in these markets,” Jones wrote. “A merger of this size and type, according to experts on health insurer and healthcare mergers, will likely lead to increased prices and decreased quality.”
Nationally, Aetna controls 9% of the Part D market, while CVS has a 24% stake. That level of concentration will likely lead to higher premiums, Jones argued. In California, despite the presence of 10 Part D plans, the merger would lead to just three competitors controlling 83% of the market.
Additionally, Jones said the deal would “eliminate Aetna as a potential entrant” into the already crowded PBM market. He reasoned that as one of the nation’s largest health insurers, Aetna could develop an in-house PBM given the companies existing expertise with formulary management and rebate contracting.
Jones said it would be “impossible” to create a PBM competitor that could match Aetna’s strength and experience.
“If there are any other entities considering entry into the PBM market, they will now have to enter the market in conjunction with a health insurer,” he wrote. “Single entry PBMs will no longer be feasible to compete with these behemoths.”
He added that Aetna has a history of shirking regulatory compliance highlighting a recent examination of Aetna’s claims handling process that found “numerous alleged violations.” A separate investigation of Aetna’s prescription drug formularies found drugs for opioid treatment an reversal agents were “placed in inappropriately high-cost tiers.”
American Medical Association President Barbara L. McAneny commended Jones for pushing to block the merger. AMA has previously made similar calls to the DOJ.
“The American Medical Association commends California Department of Insurance Commissioner Dave Jones for taking a strong stand against the proposed merger between CVS Health Corporation and Aetna," she said in a statement. "We urge other state regulators to review the evidence and take similar action."
The letter follows a June 19 public hearing in California in which experts testified about the potential pitfalls of the merger. In response (PDF) to questions from Jones, an attorney for CVS said the combined company would generate $750 million in its second full year from “improved case management” and “optimization of sites of care.”
By the fifth year, the new entity would save an additional $2.5 billion in improved operating efficiency, he added.
But Jones said CVS-Aetna “continues to refuse to commit to pass these savings on to consumers in the form of reduced premiums.”