CVS-Aetna deal cleared by U.S.

$68B deal could set in motion era of industry changes.

CVS Health Corp. and Aetna Inc. received conditional approval to proceed with their proposed $68 billion merger.

CVS Health Corp. and Aetna Inc. received conditional approval to proceed with their proposed $68 billion merger, one of the largest in a series of recent deals that stand to transform the U.S. health-care business.

The combination would create a giant with a hand in insurance, prescription-drug benefits and drugstores across the U.S. By bringing those businesses under one roof, the companies are betting they’ll be better-positioned to face changing consumer habits and the emergence of new rivals.

The Justice Department’s antitrust division signed off on the transaction with the caveat that the companies complete an agreed-to sale of Aetna’s Medicare prescription-drug plans to another insurer. Doing so, the regulator said in a statement, would resolve its concerns that the deal could harm consumers.

“The divestitures required here allow for the creation of an integrated pharmacy and health-benefits company that has the potential to generate benefits by improving the quality and lowering the costs of the health-care services that American consumers can obtain,” Makan Delrahim, the head of the department’s antitrust division, said in the statement.

The Aetna acquisition is among the most significant health-care mergers of the past decade, combining one of the top U.S. drugstore chains with the third-biggest health insurer. Along with its thousands of retail pharmacies, CVS manages drug-benefits plans for employers and insurers.

The approval comes just a few weeks after the U.S. signed off on another deal combining a big health insurer with a pharmacy-benefits manager — Cigna Corp.’s $54 billion takeover of Express Scripts Holding Co. And it follows a recent foray by Amazon.com Inc. into the drug business with its $1 billion purchase of online prescription company PillPack.

To help seal U.S. approval for the deal, Aetna last month agreed to sell its Medicare drug plans to WellCare Health Plans Inc., to alleviate concerns that a takeover by CVS would otherwise harm competition among plans that sell pharmaceutical coverage to seniors. Under the proposed settlement, Aetna will have to help WellCare run the business during the transition and give it the opportunity to hire key employees.

In a statement, CVS said the deal was subject to state regulatory approvals, many of which have already been granted, and that the deal is on track to close early in the fourth quarter, which began this month.

“We are now working to complete the remaining state reviews,” Larry Merlo, CVS’s chief executive officer, said in a statement. The combined company, with its thousands of retail locations, will “be able to offer better care and convenience at a lower cost for patients and payors.”

Consolidation has increased across health care among hospitals, drugmakers and insurers, though some previous deals were thwarted by antitrust issues. The Cigna and CVS deals came only after the Justice Department blocked Cigna and Aetna from merging with rival health insurers last year.

Completion of the CVSAetna deal could put pressure on rivals to come up with their own deals. Walgreens Boots Alliance Inc. is the U.S.’s last remaining giant standalone pharmacy chain, and its deal-friendly CEO, Stefano Pessina, has spoken about bringing together pieces of the medical supply chain. Walgreens holds a 26 percent stake in drug distributor AmerisourceBergen Corp., which helps supply Walgreens stores, and last winter the companies held early discussions about a merger, according to reports at the time.

Walgreens, which is scheduled to report its fourth-quarter results on Thursday morning, declined to comment.