AutoInsuranceMM.Info – Low income insurance – AMA: CVS-Aetna Merger Would Reduce PBM Competition, Raise Prices
– The American Medical Association is urging the Department of Justice to squash the proposed merger between CVS Health and Aetna.
The combined entity would drastically reduce competition in many pharmacy benefit management (PBM) markets and may raise drug prices for consumers, the physician advocacy group warned in a statement emailed to journalists.
The merger is expected to increase PBM concentration in 30 out of 34 Medicare Part D regional markets, resulting in higher premiums. Ten of those 34 markets would exceed anticompetitive thresholds set by federal antitrust guidelines, the AMA pointed out.
“The CVS-Aetna deal is popularly described as a vertical merger involving two companies that don’t operate in the same markets,” explained AMA President Barbara L McAneny, MD. “But in fact, CVS and Aetna do operate as rivals in some of the same markets, raising substantial concerns that are specific to horizontal mergers.”
“A merger of these two rivals would risk a substantial reduction of competition in the stand-alone Medicare Part D prescription drug plan market and the pharmacy benefit management (PBM) services market.”
Both entities already hold significant power over their respective PBM markets, the AMA added, and combining that influence may preclude new entrants in the field. With fewer competitors, the CVS-Aetna conglomerate could raise drug prices despite national pressure to lower pharmacy costs for consumers.
“There is every indication that extensive vertical integration resulting from the proposed merger would raise prices, reduce choice and stifle innovation in markets for PBM services, health insurance, retail pharmacy, and specialty pharmacy,” said McAneny.
The AMA has taken a firm stance against the CVS-Aetna merger, as well as similar mega-mergers in the past.
The organization was strongly opposed to the proposed 2015 mergers between two sets of large payers: Anthem and Cigna and Aetna and Humana. Both deals were later terminated due to antitrust concerns and other financial issues.
Earlier in August, the AMA praised California Department of Insurance Commissioner Dave Jones for opposing the CVS-Aetna deal following a June hearing in which the AMA stressed the deal’s negative impacts on access, choice, and care quality.
“The AMA agrees with Commissioner Jones that allowing this anticompetitive merger to proceed likely would harm consumers,” McAneny said at the time.
“If left unblocked, there is every indication that the merger would raise prices, reduce choice and stifle innovation in five poorly performing markets: Medicare Part D stand-alone prescription drug plan, pharmacy benefit management services, health insurance, retail pharmacy, and specialty pharmacy.”
The AMA is not the only organization that has voiced concerns over the proposed deal. In March, the American Antitrust Institute (AAI) also cautioned the Department of Justice against allowing the merger to proceed.
Combined with the pending $67 billion merger between Cigna and Express Scripts, the CVS-Aetna merger would “trigger a fundamental restructuring of the US healthcare system” by squeezing competition out of major PBM markets, the AAI said.
“Assuming both mergers move forward, the three largest integrated PBM-insurer systems (i.e., CVS-Aetna, Express Scripts-Cigna, and Optum Rx-United Healthcare) that would dominate the markets would have weak, if any, incentives to compete,” the group added.
“High PBM market concentration and the inability of smaller PBMs to discipline competition increases the risk of input foreclosure and raises barriers to entry to potential entrants in health insurance. Higher insurance premiums, lower quality, and less innovation in relevant health insurance markets would be the likely outcome, to the detriment of consumers.”
In light of the failed efforts of Aetna-Humana and Anthem-Cigna, as well as federal efforts to address skyrocketing drug costs for consumers, the Department of Justice is likely to closely scrutinize the CVS-Aetna proposal for evidence of potentially anticompetitive outcomes.