General counsel for CVS and Aetna vowed at a congressional hearing Tuesday that the companies’ merger plans would not lead to increased costs or to restrictions on service offerings—but experts aren’t so sure.
Aetna will not restrict members’ use of services outside of CVS as a result of the union of the two companies, Thomas Moriarty, executive vice president, chief policy and external affairs officer and general counsel for CVS, told members of the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law.
Moriarty also said that CVS would not end or restrict its business pharmacy benefits management relationships with other payers, as Aetna members make up only about 11% of CVS’ pharmacy business.
“We would have so much more to lose than we would to gain,” Moriarty said.
Thomas Sabatino Jr., general counsel for Aetna, said that cost savings and value earned through the alignment would be passed on to members through lowered premiums and increased benefits. Moriarty said that Aetna members would see lower prices at the pharmacy as well.
Consumer advocates are skeptical of those promises, however. George Slover, senior policy counsel for Consumers Union, the policy and advocacy group that publishes Consumer Reports, testified that a lack of transparency about cost savings could keep consumers from seeing any of the benefits that CVS and Aetna reap from the merger.
“Genuine risks to competition won’t be fixed by pledges of good behavior,” Slover said.
For CVS and Aetna to hold up their end of the bargain, he said, they would have to make day-to-day decisions that go against a company’s most basic goal: earning profit.
Other health policy experts have made similar arguments, saying that increased consolidation in healthcare rarely pays off for patients. Despite this, the industry has been swept up in “merger-mania” over the past several months, a trend that is not likely to slow down any time soon.
As the CVS-Aetna deal is a vertical integration—in which two entities that are at different parts of the supply chain, and thus not direct competitors, merge—it carries less of a risk of anticompetitive abuse than a horizontal deal, but that doesn’t mean such abuse is impossible, Slover said. In particular, the “black box” of pharmacy benefit management—members can’t see the dealing behind the scenes that PBMs perform—poses a risk, he said.
The American Medical Association raised similar concerns in written testimony (PDF) submitted before the hearing, saying the deal poses anticompetitive concerns “unique to vertical mergers,” as a new competitor would have to enter the market in both insurance and PBM to compete with the combined CVS-Aetna.
“Close scrutiny is needed to determine if the ramifications of this massive merger will threaten the benefits of competition, including increased access and choice, lower prices and higher quality care for patients,” AMA President David O. Barbe, M.D., told FierceHealthcare in an emailed statement.
Other experts at the hearing had a more positive outlook on the deal, however. Geoffrey Manne, the executive director of the International Center for Law & Economics, said that the merger would allow the companies to greater innovate the stagnating healthcare space. The deal is an example of how the private sector can lead the way in shaking up healthcare, Manne said.
“The overriding theme of my testimony is that the proposed merger is a commendable effort to experiment with substantial reform of what we can all agree is a beleaguered healthcare system,” he said.