A federal judge appears to be nearing a surprise move to block CVS’ $69 billion acquisition of Aetna, according to sources close to the health industry giants.
US District Richard Leon — who warned lawyers at a little-noticed hearing last week that they may want to cancel their summer vacation plans — looks like he is setting the stage to reject the mega-merger on concerns that it could raise prices and kill choices for consumers, sources told The Post.
At last week’s hearings, Leon appeared to take digs at the Department of Justice for its weak policing of the deal. Arguing that the addition of 21 million Aetna customers could uncomfortably strengthen CVS’s pharmacy benefits management business, Leon asked, “Did Justice evaluate that issue?”
After a CVS witness said he thought DOJ had and the findings were confidential, Leon said, “If they did it in writing, the Court sure as heck should have it,” according to a court transcript.
After sparring with lawyers and witnesses for two days over the deal’s expected impact on competition in health care, Leon scheduled oral arguments for July 17 and is expected to rule soon after that.
“I think Leon rules against us,” a source working with CVS and Aetna said, speaking on the condition of anonymity. “If he rejects the settlement, we would have to figure out the next steps.”
A rejection by Leon would likely set the stage for an appeal by DOJ, which has recommended that the deal be approved.
Failing that, the DOJ could theoretically present a new settlement, although experts say that could be difficult, as the deal’s current concession to sell Aetna’s Medicare Part D individual prescription drug plans to WellCare Health Plans addresses the only significant overlap between the businesses.
Indeed, it is specifically this remedy that Leon has the power to reject, effectively scuttling the deal or at least forcing a major rejiggering, according to experts.
It’s a decidedly different scenario from what CVS and Aetna were expecting last fall, before a Nov. 29 hearing in which Leon stunned lawyers for the companies and the Justice Department alike by announcing that he would not “rubber stamp” the deal.
At the time, the companies had already set the merger in motion, including the sale of Aetna’s Medicare Part D unit.
Leon could be the first to reject a merger settlement since 1974, when the Tunney Act was passed by Congress, giving judges the power to disapprove settlements, said Seth Bloom, who as a member of the US Senate Judiciary Committee helped in 2004 to revise the law to make it easier for judges to act.
“The fundamental weakness in the Tunney Act is it does not require the merging parties to wait for judicial approval to consummate their deal,” Bloom said. Still, “it allows a judge to hold hearings and to take a closer look at a merger.”
“CVS Health and Aetna have been one company since the deal closed in November 2018, and the combined entity is already showing progress toward its goal of transforming the consumer health experience,” CVS said. “We won’t be distracted by unfounded rumors and speculation.”
Date: June 17, 2019
Source: New York Post