Democrats sound alarm over CVS-Aetna deal

Congressional Democrats are expressing alarm over the proposed merger between CVS Health and a health insurer, fearing it will lead to higher costs and less choice for consumers.

CVS Health, a drug store chain, announced over the weekend that it has agreed to buy Aetna for about $69 billion in what could be, if approved, the largest health insurance deal in U.S. history.

But lawmakers are already raising questions about how the merger could impact consumers if it is approved by the Department of Justice.

{mosads}“I’m very concerned to see another merger in the U.S. that creates another behemoth industry and that has vertical integration,” said Sen. Elizabeth Warren (D-Mass.), referring to an integration of two companies that aren’t direct competitors.

“We already have had great concentration in the pharmaceutical industry, in drug stores around the country and in health insurance. And now to see those two start to join really produces a kind of concentration that cuts down on competition and in the long run tends to drive up prices for consumers,” she said.

The companies argue that they’ll be able to improve health-care outcomes and reduce costs immediately upon integrating.

“We have the ability to begin to bend that cost curve and at the same time help people achieve their best health,” CVS Health CEO Larry Merlo said this week on CNBC.

CVS Health and Aetna have worked together since 2010, but the merger could open a new door for health care in the country, Merlo said on CNBC.

The companies have plans to turn CVS’s 10,000 pharmacies and clinics into community-based sites of care with nurses and other health professionals available to give diagnoses or do lab work.

“It’s really the perfect time to bring these two companies together to create a new health care platform that can be easier to use, less expensive for consumers, and really create a new front door to health care in our country,” Merlo said.

But some aren’t so sure.

David Balto, an antitrust attorney in Washington, said it’s easy to predict the effects of the proposed merger on consumers when you look at CVS’s past acquisitions.

The company’s 2007 merger with Caremark, a pharmacy benefits manager, led to fewer choices for consumers and drove up prices, he argued.

Pharmacy benefit managers serve as a middleman between insurers and drug companies, working to get the best deal on a prescription.

“It doesn’t take much to predict what CVS is going to do with the acquisition of Aetna,” Balto said.

“It’s going to force consumers into using only CVS, CVS stores or CVS specialty pharmacies for their drugs, and ultimately, consumer health care will be worse, not better,” he said.

Any cost savings produced from the merger, he argues, likely wouldn’t be passed along to the consumer.

CVS and Aetna, meanwhile, argue that the merger would give the company more leverage in negotiations with drug companies on drug prices.

But experts have long criticized pharmacy benefit managers, saying they increase drug costs to raise their profits. Sen. Ron Wyden (D-Ore.) said he shared those concerns when it comes to the CVS deal.

“We’re looking at [the merger],” said Wyden, ranking member of the Senate Finance Committee. “I’m particularly concerned about what provisions they’re going to have in respect to pharmacy benefit managers. I continue to believe these pharmacy benefit managers, the middle men in American health care, are a key factor in why health care costs go up so dramatically.”

He added: “We don’t know what they put in their pocket and what they put in their consumer’s pocket. I have a lot of questions about that.”

Sen. Bernie Sanders (I-Vt.), a vocal opponent of the U.S. health-care system, slammed the proposed merger as a contributor to rising costs.

“This is why we have, by far, the most expensive health care system in the world,” Sanders said in a statement. “It is designed to provide huge profits to insurance companies and drug companies and exorbitant compensation packages to CEOs. Congratulations to Mr. [Mark] Bertolini, the CEO of Aetna. If the proposed merger with CVS goes through, he will reap about $500 million. What a great use of health care dollars! What a system!”

The merger is also drawing attention from Democrats on the House side.

Rep. Frank Pallone Jr. (D-N.J.), ranking member of the Energy and Commerce Committee, which has jurisdiction over health-care issues, has asked Chairman Greg Walden (R-Ore.) to hold a hearing on the merger.

The merger “would be a new frontier in American health care delivery — with significant potential for benefit or harm to consumers across the country,” Pallone wrote in a letter to Walden.

“As the business of health care continues to morph, it is critical that Congress closely examine the changing relationships among health care entities and the impact these changing relationships have on the way health care is delivered in this country,” Pallone said.

Sen. Tim Kaine (D-Va.), a member of the Senate Health Committee, said he wants that committee to hold a hearing on the proposal as well.

“I can see the pluses, and I can see the minuses,” he said. “I hope we can have a hearing on it because I think it might be a little bit of an example of things to come, and we might want to get into what it means for the health-care system.”

It’s far from certain that the Department of Justice will approve the merger.

The department recently sued to block another vertical merger between AT&T and Time Warner, arguing it could reduce consumer choice.