Judge questions CVS, Aetna merger

WASHINGTON — The federal government says concerns about a proposed merger between CVS and Aetna giving CVS pharmacy benefit managers an unfair advantage are outside of the scope of a court challenge to the merger.

The judge in the case appears to disagree.

During a two-hour hearing Friday on the proposed $69 billion merger between the two health-care giants, U.S. District Court Judge Richard Leon seemed to take exception to Department of Justice arguments that because the department had settled its concerns about the merger, there was no further need to review it.

But Leon has consistently argued that it is the court’s

job to review the merger under the Tunney Act, a 1974 law designed to determine whether mergers such as the Cvs-aetna union would create a monopoly.

Justice officials argue that they settled any concerns about unfair competition by getting Aetna to agree to sell off its Medicare Prescription Drug program to a third entity, Wellcare. That divestiture, they said Friday in Washington, D.C., is sufficient to settle any concerns about a monopoly.

But Leon has publicly questioned whether the merger would nonetheless give CVS’S Caremark pharmacy benefit manager an unfair advantage over other PBMS, which are the middlemen that negotiate

prices between drug companies and pharmacies.

Meanwhile, attorneys representing opponents of the merger argued that having Aetna divest of its prescription drug benefit would do little to solve the anti-competitive problems posed by the deal.

Christopher Casey, an attorney representing the AIDS Healthcare Foundation, argued that if the deal went through, it would result in higher prices for the most vulnerable populations — the sick, the aging and the disabled. And it would do nothing but help CVS, which, he said, “in major areas of the country … is the only game in town.”

The judge is the public’s last chance for a positive result. Otherwise, he said, “There’s no going back. The merger is permanent.”

On Friday, Enu A. Mainigi, attorney for CVS, argued

that the proposal would not gobble up Aetna’s 22 million customers for CVS’S pharmacies, saying only 10 million of the 22 million Aetna customers have a pharmacy benefit through Aetna. The rest of the 22 million, she said, “choose to go somewhere else for their pharmacy benefit.”

Mainigi also argued that insurance companies and employers choose which pharmacy is preferred — not the PBMS. And she argued that the PBM market is deeply competitive, with 70 percent of the nation’s health care consumers using PBMS other than CVS Caremark.

“There’s an enormous amount of churn in the PBM marketplace,” she said.

CVS, along with Optum and Expressscripts, account for about 70 percent of the pharmacy benefit manager market nationwide.

Jay Owen, an attorney

for the federal government, argued that the PBM issue is beside the point. The federal government originally had concerns about the merger, he said, but the divestiture of Aetna’s prescription drug program “reasonably addresses” their concerns, he said.

He argued that concerns about PBM competitiveness are “outside the scope” of the discussion because they were not among the Justice Department’s concerns.

But Leon suggested it was not their place to determine the scope of what was in the public interest, accusing the government lawyer of violating “the first rule of holes.”

“If you find yourself in a hole, stop digging,” Leon said. “You’ve been in a hole a long time.”

As part of its 16-month Side Effects series, The Dispatch has reported on why prescription drug prices

are so high, focusing in particular on how CVS has used its pharmacy benefit manager business to benefit itself, sometimes driving competitors out of business in the process.

Leon began the hearing by scolding the Justice Department for arguing in briefs that it had not had a chance to call a witness at a June hearing aimed at gathering information about the competitive concerns of the merger.

Leon said that the Justice Department had, in fact, had that opportunity, but given the chance to question one of the witnesses, had deferred to attorneys for CVS instead. Justice asked for a chance to call more witnesses after the two-day hearing, a request that Leon denied, saying it was “phantasmagorical.”