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CVS HEALTH CORPORATION

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CVS Health : Federal Judge Wraps Up Hearings Into CVS-Aetna Deal

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06/06/2019 | 05:30pm EDT

By Tom Burton

WASHINGTON -- Two days of unprecedented court hearings on CVS Health Corp.'s acquisition of Aetna Inc. wrapped up without a firm date for when a federal judge would rule on a Justice Department settlement that allowed the deal, and legal uncertainty for the merged firm could last well into the summer.

Judge Richard Leon heard testimony this week on the nearly $70 billion merger in a proceeding he decided to conduct after reviewing the terms of the October settlement between the two companies and the Justice Department that allowed the deal to go through. Judge Leon has said he is concerned the settlement doesn't do enough to protect consumers, including those who purchase medication under the federal drug plan known as Medicare Part D. CVS and Aetna had been competitors in that business.

He said he would accept final briefs and then hear closing arguments from supporters and opponents of the deal in July.

Witnesses for medical and consumer groups told the judge that the terms of the settlement would lessen competition and hurt consumers.

A major focus of the hearing has been whether a CVS plan to sell Aetna's Medicare Part D business to WellCare Health Plans Inc. would sufficiently bolster competition and protect consumers.

Diana Moss, president of the American Antitrust Institute, testified on behalf of consumer groups that "premiums will increase as a result of consolidation" of CVS and Aetna. "Sometimes, the most effective remedy is for the government to move to block a merger," she said.

Dr. Neeraj Sood, an economist testifying for the American Medical Association, said there are "significant competitive concerns" with the Justice Department's settlement allowing the merger.

"The public here is really vulnerable," said Dr. Sood. The divestiture to WellCare would lead to far less competition in Medicare drug plans than existed before the merger, he said, adding that many patients in the plan are low-income and have numerous ailments.

Terri Swanson, Aetna's vice president of Medicare products, disputed that assessment. Speaking on behalf of both companies and the Justice Department, Ms. Swanson said WellCare had "the most successful prescription-drug plan this year." In fact, she said, WellCare has been so competitive that it is expected to roughly double in size, to about 4 million members by the end of this year.

CVS executive vice president Alan Lotvin testified that the company's acquisition of Aetna has allowed the combined company to start innovative programs to treat chronic disease that can ultimately result in lower premiums for its customers.

CVS and Aetna closed the deal in November, and they said the combination of CVS's pharmacies and pharmacy-benefit management business with Aetna's health insurance would lead to more efficient care for consumers.

The hearing comes as focus on competition is intensifying. The Wall Street Journal reported Friday that the Justice Department's antitrust division is gearing up for an investigation of Alphabet Inc.'s Google unit. At the same time, the Federal Trade Commission is considering a similar inquiry of Facebook Inc., and House Democrats are launching their own hearings.

While a law called the Tunney Act stipulates that the government must get merger settlements approved by a federal court, that process normally is fairly routine. Judge Leon, though, is known for going his own way in his courtroom.

It isn't clear what would happen next if Judge Leon rejects the settlement. CVS already has sold the assets the Justice Department required it to divest, and the company has contractual obligations with WellCare to fulfill the terms it agreed upon with the government.

At the end of the two days of testimony, a Justice Department lawyer said there had been multiple misstatements of facts and asked the judge to allow for more witness testimony. The judge replied, "This is not a trial. You seem to have a hard time understanding the distinction."

Write to Tom Burton at tom.burton@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CVS HEALTH CORPORATION -2.00% 56.23 Delayed Quote.-12.33%
WELLCARE HEALTH PLANS -0.74% 288.05 Delayed Quote.23.01%
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Financials (USD)
Sales 2019 252 B
EBIT 2019 14 764 M
Net income 2019 6 571 M
Debt 2019 63 386 M
Yield 2019 3,47%
P/E ratio 2019 11,3x
P/E ratio 2020 9,83x
EV / Sales2019 0,55x
EV / Sales2020 0,51x
Capitalization 74 542 M
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Last Close Price 57,38  $
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NameTitle
Larry J. Merlo President, CEO & Non-Independent Director
David Wyatt Dorman Chairman
Jonathan C. Roberts Chief Operating Officer & Executive Vice President
Eva C. Boratto Chief Financial Officer & Executive Vice President
Troyen A. Brennan Chief Medical Officer & Executive Vice President
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