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From Antitrust Law Daily, January 14, 2019

Tunney Act proceedings for CVS-Aetna merger settlement must proceed, despite shutdown

By Jeffrey May, J.D.

The Department of Justice Antitrust Division’s contention that the proposed merger of CVS Health Corporation and Aetna Inc. would have benefits and efficiencies to the healthcare system foreclosed the government from seeking a delay in responding to public comments on the settlement during the current lapse in appropriations. The government was ordered to file its response to the comments with the court by February 15, 2019.

The federal district court in Washington, D.C. has ordered the Department of Justice Antitrust Division attorneys to continue reviewing and responding to public comments on the proposed final judgment, resolving competition concerns about the CVS Health Corporation and Aetna Inc. merger. In light of the current partial government shutdown, the Antitrust Division in January 8 status report had informed the court that it could not work on its response to the public comments until funding was restored by Congress or otherwise ordered by the court. The court treated the status report as a motion to stay proceedings, and denied the motion. The government attorneys were told to "roll up their sleeves" and file the public comments and the government’s response with the court as required by the Tunney Act by February 15 (U.S. v. CVS Health Corp., January 11, 2019, Leon, R.).

In October 2018, the Justice Department conditionally approved the deal, which is valued at $69 billion. Under the terms of a proposed consent decree, CVS and Aetna were required to divest Aetna’s Medicare Part D prescription drug plan business for individuals in order for the merger to proceed. The Justice Department, along with the state attorneys general from California, Florida, Hawaii, Mississippi, and Washington filed a complaint, seeking an injunction to block the merger at the same time as the proposed settlement, that, if accepted and approved by the court, would fully resolve the Justice Department’s concerns. The Department of Justice stated that the proposed divestiture will alleviate concerns that the merger will cause increased prices, inferior customer service, and decreased innovation in sixteen Medicare Part D regions covering 22 states.

The settlement has drawn criticism from some. The American Antitrust Institute, submitted comments with the Department of Justice Antitrust Division, requesting an explanation of why the Division accepted a consent decree in the CVS-Aetna merger that only addressed the horizontal anticompetitive effects but failed to address the vertical anticompetitive effects of the transaction. Two pharmacist groups—Pharmacists United for Truth and Transparency and the Pharmacists Society of the State of New York—also voiced their objections to the deal. The Department of Justice opposed efforts of these and other groups to intervene in the proceedings.

The response to the settlement has prompted Judge Leon to take a particularly close look at the proposed settlement. The government’s responses to the public comments could impact the judge’s decision on whether or not to sign-off on the deal.

The case is No. 1:18-cv-02340-RJL.

Attorneys: Jay David Owen, U.S. Department of Justice, for the United States. Emilio Eugene Varanini, Office of Attorney General, for State of California. Craig D. Singer (Williams & Connolly LLP) and Michael G. Cowie (Dechert, LLP) for CVS Health Corp. Jesse Solomon (Davis Polk & Wardwell LLP) for Aetna Inc.

Companies: CVS Health Corp.; Aetna Inc.

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