Federal authorities approved the biggest health care industry merger on record this week when they allowed a deal between CVS Health and Aetna to move forward. Approval by New York’s regulators is still pending. New York’s health insurance regulator, the Department of Financial Services (DFS), is holding a public hearing next week in New York City to hear what advocates and consumers have to say about the merger.
Health insurance and Pharmacy Benefit Management (PBM) markets in the U.S. are already highly concentrated. According to the Council of Economic Advisors — the three leading PBMs (OptumRX, Express Scripts and CVS Caremark) already control 85 percent of the market. Each of the big three PBMs are entering into potentially dynastic combinations with health insurance companies –Aetna with CVS, Cigna and Express Scripts (approved by Department of Justice), and United Health-OptumRx, which is already operational. These new insurer-PBM combinations threaten to become major health care oligopolies, and the game of health care consolidation won’t stop here.
HCFANY testified in June about the dangers this and other mergers might pose for consumers. The merger of CVS Health and Aetna is especially concerning because current regulations may not be well-suited to address resulting consumer harms. Most of these large mergers have been between similar entities – health plans merging with health plans or hospital systems merging with hospital systems. This merger is different because it joins a direct health care provider (the CVS MinuteClinics), a pharmacy benefit manager (CVS CareMark), and a health plan. It is unclear what the repercussions will be or how the state should respond.
The main effects of the merger will be:
- Aetna will have an incentive to make members use CVS providers. Navigating provider networks is already difficult enough for consumers.
- Aetna will have less incentive to demand good prices from CVS providers – high payments to MinuteClinics or for prescriptions just mean higher profits for the new company.
- The new company would have an unprecedented level of access to data on consumers and the prices their competitors pay for prescription drugs.
- There will be significantly less competition for PBM services and health insurance in many states and local markets across the country, including New York. History shows that consumers lose when markets consolidate – even though the companies promise greater efficiencies, they do not pass those savings on to consumers and instead use their market power to raise prices.
Each of these points matters to consumers. HCFANY will ask the State to hold CVS and Aetna accountable for promises it makes to regulators and the public. For example, we will ask the State to closely watch Aetna’s rates going forward. We encourage advocacy groups and consumers to participate in the hearing, whether to testify or to listen. Those that want to testify must register by October 16 – you can do so by emailing email@example.com with the subject line “CVS-AETNA 2018 HEARING.”