'This Should Be Interesting': DC Judge Signals Skepticism of CVS-Aetna Merger
The hearing was set to last up to three days but ended Wednesday after Wu and executives from CVS and Aetna argued that the merger would not stifle competition.
June 05, 2019 at 06:12 PM
5 minute read
Late November Judge Richard Leon rose to the bench in his Washington, D.C., courtroom for what was expected to be a routine hearing as the Justice Department sought final approval of a settlement clearing CVS Health Corp.'s acquisition of Aetna Inc.
The hearing was supposed to address the appointment of an outside monitor to oversee the divestiture of Aetna's prescription drug plan business, a condition of the Justice Department's approval of the $69 billion merger. But Leon apparently had more on his mind.
Leon launched into a blistering statement, accusing the Justice Department of keeping him “in the dark, kind of like a mushroom” about CVS and Aetna formally consummating their $69 billion deal while his review of their settlement was pending. More than six months later, Leon has made clear that he has no intention of serving as a “rubber stamp,” as he put it then.
On Tuesday and Wednesday, Leon presided over an unprecedented hearing to examine whether the Justice Department adequately protected consumers in approving CVS' acquisition of Aetna. The proceeding was closely watched in antitrust circles, likened to a “mini trial” with witnesses testifying about a deal that received the Justice Department's blessing.
On Wednesday, as CVS and the Justice Department called their witnesses, Leon expressed skepticism that the settlement did enough to ensure continued competition in the health care industry.
Leon sharply questioned former Federal Trade Commission economist Lawrence Wu, the first witness called by CVS, about whether the newly combined company now possesses undue market power. Wu's questioning was led by Dechert partner Michael Cowie, with Leon occasionally jutting in.
Much of the testimony concerned CVS's pharmacy benefit management business, which administers prescription drug programs for health plans. Pharmacy benefit managers, or PBMs, effectively serve as middlemen between drug makers and pharmacies.
Wu, the president of NERA Economic Consulting, dismissed concerns that the acquisition of Aetna would give CVS unfair leverage allowing it to undercut competitors. Since 2011, Wu noted, CVS has served as the pharmacy benefit manager for Aetna under a 12-year contract.
But Leon said the acquisition put Aetna in a “very different” position with CVS.
“It's different now,” Leon said. “If they merge, they own it.”
“That's a very different posture, is it not?” he added.
Wu replied that many health plans use pharmacy benefit managers other than CVS's, which operates under the brand name “CVS Caremark.” Early in his testimony, Wu referred to the business as only “Caremark,” which appeared to frustrate Leon.
“Don't disassociate it from CVS. It's CVS's PBM,” he said.
Leon took a more reserved approach in his questioning Tuesday, when the American Medical Association and other groups opposed to the merger called witnesses. The hearing was set to last up to three days but ended Wednesday after Wu and executives from CVS and Aetna argued that the merger would not stifle competition.
The hearing marked Leon's latest run-in with the Justice Department's antitrust division. Last year, he rejected the Justice Department's challenge to AT&T's proposed acquisition of Time Warner, dealing the antitrust division a defeat in one of the most significant antitrust cases in decades.
During Wednesday's hearing, Leon gave a nod to that case when Wu drew a comparison between the AT&T-Time Warner deal and CVS's acquisition. At the mention of the AT&T deal Wednesday, Leon said, “This should be very interesting. I'm all ears.”
The three witnesses called Tuesday expressed concerns that the merger would further consolidate the health insurance market and drive up out-of-pocket costs for consumers. The Justice Department had asked leading up to the hearing to be allowed to cross-examine witnesses, but Leon rejected the request.
“We are not only losing a competitor,” said University of Southern California professor Neeraj Sood, an expert called by the American Medical Association. In Aetna, he said, “we are losing a strong competitor in this market.”
As a condition of approving the CVS deal, the Justice Department required Aetna to sell off its Medicare Part D prescription drug plan business to address antitrust concerns in that specific market. On Tuesday, Leon appeared to wrestle with his review should center on that market or extend more broadly.
“Should I limit myself to (prescription-drug plans) or look at how these entities that have merged will impact the greater market?” Leon said.
Sood demurred, saying that he wasn't a lawyer. But he argued that the CVS-Aetna merger raised broader issues across the health care industry.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllPaul Weiss’ Shanmugam Joins 11th Circuit Fight Over False Claims Act’s Constitutionality
‘A Force of Nature’: Littler Mendelson Shareholder Michael Lotito Dies At 76
3 minute readUS Reviewer of Foreign Transactions Sees More Political, Policy Influence, Say Observers
'Unlawful Release'?: Judge Grants Preliminary Injunction in NASCAR Antitrust Lawsuit
3 minute readTrending Stories
- 1Call for Nominations: Elite Trial Lawyers 2025
- 2Senate Judiciary Dems Release Report on Supreme Court Ethics
- 3Senate Confirms Last 2 of Biden's California Judicial Nominees
- 4Morrison & Foerster Doles Out Year-End and Special Bonuses, Raises Base Compensation for Associates
- 5Tom Girardi to Surrender to Federal Authorities on Jan. 7
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250