Why NY would crush CVS pills

New York regulators on Thursday threatened to block CVS Health’s $69 billion merger with Aetna, demanding that the companies not raise insurance premiums in New York and that its pharmacy-benefits manager submit to state regulation.

New York is the last major obstacle that CVS, one of the nation’s largest drugstore chains and pharmacy benefit managers (PBMs), has in getting clearance to buy the nation’s third-largest insurer. Connecticut, where Aetna is based, approved the merger this week. Federal regulators have also blessed the tie-up.

“I can stop the deal if it is reasonably necessary to protect New Yorkers,” Department of Financial Services Superin- tendent Maria Vullo said at a public hearing Thursday.

Vullo said she is concerned that CVS, after borrowing $40 billion to fund the merger, could raise the cost of insurance premiums for 1.1 million New Yorkers.

“In our view, there must be a clear enforceable commitment not to transfer the cost of paying back loans to policyholders,” she said.

Vullo was also seeking CVS support for a proposed state law requiring PBMs to register with the DFS, giving DFS the power to reduce drug prices and limit abusive practices.

With her glasses on the tip of her nose, Vullo asked CVS lawyer Elizabeth Ferguson in a booming voice: “Will you vocally support the bill?”

“We would not oppose it,” Ferguson said, not going any further.

The head of the Pharmacists Society of the State of New York, Kathy Febraio, said there was a need for PBM regulation.

Last October, she said independent pharmacies that use CVS’ PBMs saw a dramatic cut on generic drug reimbursements.

Within a month, CVS started asking some of these suddenly financially strapped pharmacies to sell their stores to CVS, she said.

“Any retail acquisition activity by CVS Pharmacy is completely unrelated to the PBM business’ management of its pharmacy network,” said a CVS spokesperson.

Febraio added that reimbursement returned to somewhat normal levels by December 2017, just as CVS announced its merger agreement to buy Aetna.