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Could one member of Congress from Arkansas cause regulators to delve more deeply into the potential anticompetitive effects of the increasing consolidation in the health-care industry?
Rep. Rick Crawford (R-Ark.) sent letters to the Justice Department and the Federal Trade Commission asking them to carefully review the $67.5 billion CVS-Aetna merger and its impact on independent pharmacists and consumers in his state. CVS Health Corp. not only has thousands of retail drugstores but also has its own pharmacy benefit manager (PBM) subsidiary, CVS Caremark. Independent pharmacists in Arkansas have been tussling with CVS Caremark over their reimbursement rates for independent pharmacies in the state, saying the PBM’s practices are unfair to nonchain pharmacies.
More broadly, Crawford is raising the issue of whether large vertical mergers like CVS-Aetna harm consumers. The combined companies would have more than $240 billion in annual sales and would be involved in selling insurance, negotiating drug prices between drugmakers and insurers, and running a major pharmacy chain, according to company data from Bloomberg Law.
If the DOJ and the FTC take Crawford up on his request, the drug distribution system—including not only pharmacy benefit managers, insurers, and pharmacies but also drug distributors and wholesalers like McKesson Corp. and Cardinal Health—could come under the microscope of antitrust regulators.
If regulators expand the scope of the CVS-Aetna merger examination to include PBM ownership of retail and mail order pharmacies, it “could lead to a reexamination of the state of competition at all stages of the drug distribution chain,” James M. Burns of Akerman LLP in Washington told Bloomberg Law March 13.
Vertical mergers, which involve companies on different sides of the supply chain combining, don’t generally raise the same kind of anticompetitive red flags as horizontal mergers, in which direct competitors with the same customer bases combine. Yet the sheer size of the CVS-Aetna combination could draw more scrutiny from antitrust regulators, especially given that the similar behemoth Cigna-Express Scripts proposed merger is also on the table. Cigna announced its proposed $54 billion buyout of St. Louis-based PBM Express Scripts March 8.
“Left unchecked, the vertical integration of PBMs could destroy competition in community pharmacy, leaving patients with broken provider-patient relationships, higher costs and less access to patient centered care,” Crawford told the regulators.
“This merger could have serious implications for healthcare delivery in rural areas,” he wrote. “Merging two entities with such a large footprint within the drug supply chain will only exacerbate problems with respect to pharmacy access.”
But CVS spokeswoman Christine Cramer sees things differently.
“Overall reaction to the combination of CVS Health and Aetna has been positive,” Cramer, senior director of corporate communications at CVS Health, told Bloomberg Law in an email March 12.
“We look forward to continuing to talk to lawmakers and leaders to explain why we believe this transaction will help transform the care system for the benefit of consumers and patients,” she said. CVS expects the transaction to close in the second half of 2018, she said.
CVS Caremark’s pharmacy network is broad and includes local, independent pharmacies, Cramer said. CVS Caremark also operates mail-order pharmacies, another competitive concern for independent pharmacies.
For their part, independent pharmacists are particularly concerned about these vertical mergers between PBMs and providers.
“Consolidation among health care giants leads to fewer choices for patients and plan sponsors,” Douglas Hoey, pharmacist and CEO of the National Community Pharmacists Association in Alexandria, Va., said in a statement.
Arkansas Pharmacists Association (APA) chief executive Scott Pace said the proposed merger is straight-up anticompetitive.
“With 10,000 [CVS] retail pharmacies and CVS Minute Clinics, what they’re trying to do is to create a national HMO,” Scott Pace told Bloomberg Law in a March 13 telephone call. “It’s going to be very anticompetitive and bad for patients. The DOJ and the FTC should take a hard look at stopping it.” An HMO provides medical care to patients and requires patients to choose providers from a network of doctors under contract with the HMO.
The Pharmaceutical Care Management Association, a Washington, D.C.-based trade association that represents PBMs, had no comment on the CVS-Aetna merger. But Greg Lopes, senior director, strategic communications for PCMA, said the FTC has already examined the issue of PBM ownership of mail-order pharmacies and found no ill effects.
An FTC report determined that PBM-owned mail-order pharmacies, among other things, have incentives closely aligned with their customers: the third-party payers who fund prescription drug care, Lopes said.
James Arnold, with Rep. Crawford’s office, told Bloomberg Law neither Attorney General Jeff Sessions nor acting FTC Chairman Maureen Ohlhausen had responded to the congressman’s letters yet.
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