CVS and Aetna: ‘Too Big To Regulate?’

Assembly Insurance and Health Committees Conduct Joint Hearing on CVS' Plans to Buy Aetna

Yesterday, members of the New York State Assembly held a public hearing on the proposed merger of CVS Health and Aetna, Inc. Representatives from CVS Health and Aetna, consumer groups, pharmacists and physicians spoke before the Assembly Standing Committees on Insurance chaired by Assemblymember Kevin A. Cahill (D-Kingston) and Health chaired by Assemblymember Richard N. Gottfried (D-Manhattan). Although invited, representatives for the Departments of Health and Financial Services did not attend the hearing. This precluded the Assemblymembers in attendance from asking questions and receiving testimony on the oversight vested in these agencies to provide review and their engagement thus far with the processes at both the state and federal levels.

In December of 2017, CVS Health announced plans to acquire Aetna, Inc., a transaction that would create one of the largest health conglomerates in the United States. The proposed acquisition remains under review by the United States Department of Justice. The Assembly hearing focused on the potential impact on New Yorkers and the role that New York State regulators will play.

Following the conclusion of the hearing, Assemblymember Cahill summarized, "Our hearing today helped shine light on the impact the proposed merger will have on health care delivery in New York State. New York has a long tradition of professional and non-profit healthcare and it is critical that regulators, both at the Federal and State level, ensure that any major changes, such as this one, have unimpeded objectives of improving access and quality of care. Today's hearing allowed parties to register in on the role that the State should play in approving the transaction and regulating the entities. It also served to ensure that New Yorkers' voices are being heard in the process. While the testimony offered by CVS and Aetna contend that the aim of this acquisition is to better healthcare outcomes, we must be vigilant that the companies remain good corporate citizens and recognize the significantly higher standard to which we hold the guardians of our health care."

"An acquisition like this would reshape health care delivery," said Assemblymember Gottfried. "Pharmacy benefit managers, like CVS's CareMark, and health plans have leverage over pharmacies in ways that could favor CVS's own stores at the expense of independents and other chains. It should be of great concern to have what economists call 'vertical integration' - in this case a major health care provider and a major health insurer sharing the same bottom line - with dramatic effect on consumers and others in the market. It's critical that State and Federal regulators assess and understand the potential impact on patients, insurance networks, and drug purchasing and dispensing processes. Today's hearing, including feedback from CVS, Aetna, other health care providers, and consumer advocates, was an important step in that process."

"I thank all of today's panelists who attended this hearing and shared their thoughts about the merger," continued Asssemblymember Cahill. Among the testimony registered by consumer and patient representatives was a concern that a combined CVS/CareMark/Aetna conglomerate might be too big to regulate. In his testimony, Chuck Bell, Programs Manager for the Consumers Union highlighted that often in the healthcare sector efficiencies such as those cited by CVS and Aetna are not passed down to consumers. Replying to a question from Assemblymember Cahill Mr. Bell responded, "We're concerned that the overall impact of merger may be so negative that whatever conditions the State imposes are not going to really be very protective of consumers. So for us the threshold question is whether it's in the public interest to begin with." Professional organizations represented by the Medical Society of New York State and Pharmacists Society of the State of New York expressed skepticism over their ability to continue to provide the highest quality of care while contending with such a vertically integrated entity.

"The lack of involvement in this process by the state Departments of Health and Financial Services are of serious concern. They have regulatory jurisdiction and responsibility over significant aspects of this plan. Their failure to attend today's hearing leads to the conclusion that either they lack respect for the legislative branch or are asleep at the switch. The public has not been made aware of whether the agencies have provided comments to the Department of Justice on their review or details of their work thus far analyzing the acquisition proposal.

Our State must be proactive in responding to such drastic potential changes in our health care delivery systems. The past has taught us that reactive approaches to challenges in health care could have devastating effects on consumers and our health care system. This acquisition poses serious questions for the long-term stability of the State's insurance markets and access to health care products. It is incumbent upon the agencies involved to assure the public that they are engaged with the Department of Justice's process and that access and affordability of care remain the priority at all levels of consideration," concluded Mr. Cahill.