The American Medical Association (AMA) on Tuesday formally announced the association's opposition to a proposed merger between Aetna and CVS Health—urging regulators to block the deal.
AMA made the announcement ahead of a hearing on the proposed merger that California insurance regulators held Tuesday.
A vast majority of Aetna and CVS shareholders in March voted to approve a proposed merger between the two companies. The merger is subject to regulatory approval.
In March, Joe Goode, director of corporate public relations for CVS, said, "Both companies continue to cooperate with the Department of Justice staff in its review of the transaction." He added, "Things are progressing as planned and we continue to expect that the transaction will close in the second half of 2018."
If the deal goes through, Aetna shareholders will receive $207 per share in the form of $145 in cash and $62 per share in CVS stock. The combined entity would have roughly $240 billion in annual revenue and likely would be the largest U.S. health insurer and pharmacy benefits manager.
CVS President and CEO Larry Merlo in a March statement said, "When this merger is complete, the combined company will be well-positioned to reshape the consumer health care experience, putting people at the center of health care delivery to ensure they have access to high-quality, more affordable care where they are, when they need it"
AMA opposes merger
AMA said it opposes the proposed merger "based on evidence indicating the merger's likely anticompetitive effects on Medicare Part D, pharmacy benefit management services, health insurance, retail pharmacy, and specialty pharmacy."
AMA said since December 2017 it has been conducting an analysis of the proposed merger's potential effects, seeking input from experts in antitrust law, health economics, and health policy. After conducting the analysis, AMA found evidence to suggest the merger could have negative effects on health care access, affordability, and quality.
In particular, AMA concluded that the merger could lead to:
- "A … failure to realize proposed efficiencies and benefits because the merger faces … implementation challenges, and those efficiencies have a questionable evidence base";
- An increase in drug spending and out-of-pocket costs "as Aetna and CVS fortify their dominant positions in the health insurance, pharmaceutical benefit management, [and] retail and specialty pharmacy markets that already lack competition";
- An increase in premiums resulting from more market concentration in 30 of the 34 Medicare Part D regional markets; and
- Reduced competition in the health insurance market overall, which will "ultimately adversely affect patients with higher premiums and a reduction in the quality of insurance."
AMA President Barbara McAneny said, "After very careful consideration over the past months, the AMA has come to the conclusion that this merger would likely substantially lessen competition in many health care markets, to the detriment of patients. The AMA is now convinced that the proposed CVS-Aetna merger should be blocked."
AMA said, "To ensure patients are better served by dynamic and competitive health care markets, the AMA will endeavor to persuade federal and state regulators to oppose the merger."
According to Forbes, observers have said AMA's past opposition to proposed mergers—including Aetna's proposal to merge with Humana and Anthem's proposal to merge with Cigna—disrupted the deals, which ultimately were terminated.
CVS on Tuesday said, "This combination does not further concentrate the health care sector; instead it reconfigures it to bring together disparate parts of the health care system that today lead to inefficient, ineffective and more costly care" (Baker, "Vitals," Axios, 6/20; Japsen, Forbes, 6/19; Weixel, The Hill, 6/19; AMA release, 6/19).
There's more than just M&A. Get the cheat sheet for hospital partnership and affiliation models.
Behind the flurry of M&A in recent years, a deeper trend of hospital integration is underway: the emergence of alternative partnerships that secure many of the same benefits of M&A without the financial and legal commitment: Clinical affiliation, regional collaborative, accountable care organization, and clinically integrated network.
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