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American Antitrust Institute Argues Against CVS/Aetna and Cigna/Express Scripts Deals


The 20-year-old nonprofit has fears about an increasingly consolidated, vertically integrated healthcare industry.

Original image courtesy of Wikimedia Commons user Coolcaesar. Photo has been stylized.

The American Antitrust Institute (AAI), a 20-year-old nonprofit “devoted to promoting competition that protects consumers, businesses, and society,” came out sternly this week against pharmacy giant CVS’s proposed purchase of insurer Aetna.

“CVS-Aetna would trigger a fundamental restructuring of the US healthcare system,” the group writes in a letter addressed to Assistant Attorney General Makan Delrahim. They also express concerns about Cigna’s recent $52 billion offer to buy pharmacy benefits management (PBM) company Express Scripts. “Stronger incentives to exclude rival PBMs and health insurers and to engage in anticompetitive coordination would harm competition and consumers at all levels.”

There were only a handful of major PBMs in the country prior to CVS’s 2007 merger with Caremark. In 2012, Express Scripts and Medco also combined. Together, those 2 PBMs control more than 50% of the pharmacy benefits market. The third largest, Optum Rx, is integrated with Aetna rival UnitedHealthcare.

The letter says that CVS and Aetna should face a “high hurdle” in explaining how any efficiencies their combination would create could offset competitive concerns—and they believe that the pair would not be able to do that. A move by the Department of Justice (DOJ) to block the deal would be the “only effective remedy.”

AAI’s main worry is that this form of vertical integration will harm consumers by allowing the companies to route their business entirely in-house. Aetna already has set arrangements with numerous providers, and the idea that they could force prescriptions through the retail pharmacy is a nonstarter for the watchdog group: “The merged company could frustrate rivals’ access to CVS products and services, raising their costs or cutting them off completely, thus impairing their ability to compete.”

The overall trend of healthcare industry consolidation is also alarming, according to the letter. Between 2006 and 2014 alone the largest 4 insurers increased their total market share from 74% to 83%. AAI expresses fear that the competitive advantage Aetna would gain as a subsidiary of one of the 2 leading PBMs could further this trend.

“Aetna is now either the first or second largest insurer in 57 of the 389 Metropolitan Statistical Areas studied by the [American Medical Association]. High market concentration was at the root of the DOJ’s concern in the Anthem-Cigna and Aetna-Humana mergers,” the letter states. Although those proposed arrangements represented horizontal integration, both were blocked by the Obama administration’s DOJ.

In February, the DOJ requested more information about the deal, which is valued at nearly $70 billion.

For their part, the 2 companies argue that combining their vast resources would increase care integration and, in the words of Aetna chairman and CEO Mark T. Bertolini, “dramatically further empower consumers.”

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