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From Antitrust Law Daily, February 27, 2018

Aetna, CVS executives testify about the benefits of proposed acquisition

By Stephanie K. Mann, J.D.

The merger of health insurance Aetna, Inc. by drugstore and pharmacy operator CVS Health will create an innovative new health care platform that is easier to use, less expensive for consumers, and partner with local health care providers to deliver superior, coordinate care, testified Thomas M. Moriarty, Executive Vice President of CVS Health at today’s House Judiciary Committee hearing. Hosted by the Subcommittee on Regulatory Reform, Commercial and Antitrust Law, the hearing, "Competition in the Pharmaceutical Supply Chain: the Proposed Merger of CVS Health and Aetna," will examine the potential competitive impacts of the proposed merger on consumers and the health insurance, pharmacy benefit managers, and retail pharmacy markets.

Proposed merger. The acquisition was announced December 3, 2017, when the parties reported the execution of a definitive merger agreement under which CVS Health will acquire all outstanding shares of Aetna for a combination of cash and stock. The announceddeal will combine more than 9,700 CVS Pharmacy locations and 1,100 MinuteClinic walk-in clinics with Aetna, one of the nation’s leading diversified health care benefits companies that insures an estimated 44.6 million people.

Under the terms of the merger agreement, which was unanimously approved by the boards of directors of each company, Aetna shareholders will receive $145 per share in cash and 0.8378 CVS Health shares for each Aetna share. The transaction values Aetna at approximately $207 per share or approximately $69 billion. Including the assumption of Aetna's debt, the total value of the transaction is $77 billion.

Improving healthcare. According to Moriarty, CVS has long been at the "forefront of putting our patient’s health first and improving the public health of our communities" and the acquisition of Aetna is a natural extension of this commitment by allowing consumers to access high-quality and more affordable care "where they are, when they need it." In order to combat the issues facing the health care system, this acquisition will provide a unique combination of convenience, community presence, and trusted health care professionals, stated Moriarty.

Combining CVS’s extensive retail footprint along with Aetna’s health plans, analytics capabilities, and extensive network of medical professionals to create a better, more personalized health care system in homes and communities across the country will help to maintain and improve overall health, testified Thomas J. Sabatino, Executive Vice President and General Counsel of Aetna. The company leaders also testified that the acquisition would lower costs for consumers, address the unsustainable rise in prescription drug costs, and improve patient help.

Antitrust concerns. Addressing the committee’s antitrust concerns, Sabatino reminded the committee that this acquisition is a vertical transaction with no significant overlap into the companies’ existing business. Once the merger becomes final, Aetna will become a standalone business unit of CVS Health which will continue to make significant investments designed to improve the health and wellbeing of its members and provide a better experience.

Moriarty stated his expectation that the acquisition will lead to the development of new business models as other health care providers consider actions to create a more consumer-friendly, lower cost, and more effective system.

CVS also cited the FTC’s characterization of pharmacy benefit managers (PBM), calling it "competitive…characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders." After the acquisition, CVS believes that the industry will continue to be robust. Moriarty also pointed to the strength of Part D businesses and pharmacy retail markets.

Companies: Aetna, Inc.; CVS Health

MainStory: TopStory Antitrust AcquisitionsMergers

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