The US Department of Justice (DOJ) has granted approval for the $69bn merger of CVS Health and Aetna.
However, it is on the condition that they sell Aetna’s Medicare Part D prescription drug plan business.
Consequences of the deal
The watchdog believes that the planned divestiture to health insurer WellCare Health Plans will safeguard competition in Medicare Part D individual prescription drug plans across the country. It also hopes it will completely resolve the DOJ’s competition issues.
DOJ assistant attorney general of antitrust division Makan Delrahim said: “Today’s settlement resolves competition concerns posed by this transaction and preserves competition in the sale of Medicare Part D prescription drug plans for individuals.
“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 healthcare services that American consumers can obtain.”
Retail pharmacy chain CVS and health insurer Aetna are major competitors in the sale of Medicare Part D. The pair together serves around 6.8 million members across the US.
The DOJ says that the combination of CVS and Aetna would be anti-competitive. It also believed it would inflate prices of prescription drugs. Another consequence would be reducing innovation in 16 Medicare Part D regions across 22 states.
Now, Aetna will have to sell its individual prescription drug plan business to WellCare. Moreover, it will assist the acquirer to operate the business during the transition and smoothly transfer the affected customers.
CVS and Aetna first announced the cash-stock merger deal in December last year.
The merger will combine CVS’ drugstores and pharmacy benefits manager platform with Aetna’s insurance business. The deal secured shareholders’ nod in March this year.
Upon completion of the merger, CVS Health shareholders will own a stake of approximately 78% in the combined group. In addition, Aetna shareholders will own the remainder.