Facing an unexpected judicial roadblock in the plan to combine their two business, CVS Health Corp. and Aetna Inc. successfully negotiated a deal to keep their PBM and health insurance operations separate for at least the next few months, AIS Health reported.
At the heart of the holdup is U.S. District Court Judge Richard Leon, who has the right to review the agreement that CVS and Aetna struck with the DOJ to resolve antitrust concerns with their deal.
CVS said it is currently operating Aetna's health insurance business separately from CVS’s retail pharmacy and PBM business units, with Aetna maintaining control over pricing and product offerings. Aetna personnel will also retain their current compensation and benefits, and CVS will maintain a firewall to prevent the exchange of competitively sensitive information between the two companies.
Leon issued a Dec. 21 order accepting CVS's plan, saying he's satisfied that "so long as these measures remain in place, the assets involved in the challenged acquisition will remain sufficiently separate" to facilitate his review of the deal.
John Matthews, KPMG's strategy leader for health care and life sciences, points out that if the restrictions remain in place for a long time — or potentially permanently — "then I think it actually really undermines the strategic rationale and value creation proposition for what the deal is intended to do."
In particular, if the firms have to keep their PBM separate from their insurance business — in terms of both product offerings and data sharing — that could stymie "what was going to be exciting and different about the deal, which was it allowed them to combine pharmacy and benefit data to really understand total cost of care for certain key conditions," he adds.
Whether that comes to pass largely depends upon timing, according to Matthews. "I think if they start getting into six, nine, 12 months, then it starts becoming a problem, even if it’s not a permanent injunction," he says.