An Unwanted Sequel: Merger of CVS and Aetna Would Raise Prices and Harm Consumers

December 4, 2017

 

There they go again. Yesterday, CVS Health announced it has agreed to build the health insurance company Aetna for $69 billion in a massive deal that combine drugstores, a PBM, and a health insurer into one mega-corporation. This deal would reshape the health care industry, create an utterly massive company, and raise prices and harm consumers. Like the proposed mergers of Anthem and Cigna and Aetna and Humana, this merger is bad news for everyone except a small minority of corporate executives. The Department of Justice, State Attorneys General, and state insurance commissioners should file suit to block this acquisition. 

 

Under the terms of the deal, CVS will pay Aetna about $207 per share, and the deal is expected to close in the second half of 2018. The takeover is a vertical merger, combining companies in two separate industries. It will also likely set off even more mergers in the health care industry if it is allowed to stand. 

 

The merger will likely leave consumers with less choice of where to get health care or to have their prescriptions filled. People who have Aetna's insurance could be forced to go to CVS for much of their care. And we should be wary of having retailers in charge of people's health; doctors are much better at treating illnesses than retail executives. As David Balto said, "For those people who have spent endless hours in long lines at the CVS store, trying to figure out how to meditate while standing, this merger is bad news. It means, increasingly, that they're going to be forced into these long lines. CVS doesn't win points on service, and it's these kind of vertical relationships that raise prices and deny choices for consumers." 

 

CVS CEO Larry Merlo said the deal will make health care "more affordable and less expensive", but evidence shows otherwise. When massive health care mergers take place, there is almost always an increase in premiums and quality of care often goes down. If CVS is allowed to acquire Aetna, prices would go up. We pointed out last year that competition in the health insurance industry is a problem--a few major companies dominate the sector, entry into the industry is hard, and companies use their power to crush competition and offer few choices. The same problems are present in the health care industry as a whole: 

 

Last year, we led a coalition of consumer groups opposing the Anthem and Cigna and Aetna and Humana mergers, and persuaded the Department of Justice and state Attorneys General to block the mergers, which were ruled anticompetitive in federal court. This merger of an insurance company and PBM has many of the same problems, and we oppose it as well, and hope that consumer advocates, businesses, experts, policymakers, and ordinary Americans will join us. 

 

The Department of Justice should sue to block this merger on the grounds that it will harm competition and consumers. 

Please reload

Featured Posts

United States-Mexico-Canada Agreement (USMCA)

October 5, 2018

1/4
Please reload

Recent Posts
Please reload

Archive
Please reload

Search By Tags
Please reload

Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square