December 4, 2018

Federal judge asks CVS, Aetna to justify $69B combination

HBJ File Photo
HBJ File Photo
Aetna's Hartford headquarters.
Photo | CNN Money
A CVS storefront.

A federal judge tasked with approving the U.S. Justice department's agreement to allow CVS Health to buyout Hartford-based Aetna for $69 billion has asked the companies to justify their combination.

U.S. District Judge Richard Leon in Washington slammed the companies during a hearing last week for treating him as a "rubber stamp" and for "being kept in the dark" about the takeover, according to a Reuters report.

Leon has set a Dec. 18 hearing for the two companies to argue why he shouldn't pause the acquisition, and separate their assets, until he signs off on the antitrust settlement reached in October between them and the DOJ. The companies have until Dec. 14 to respond in writing, according to court transcripts.

The timing of Leon's decision could delay the CVS-Aetna combination, which closed Nov. 28 after the deal received approval from 28 state departments of insurance.

In a statement Tuesday, CVS didn't appear worried about Leon's resistance.

"CVS Health and Aetna are one company, and our focus is on transforming the consumer health experience," CVS said.

In October, DOJ conditionally approved CVS Health's $69 billion acquisition of Aetna in October, contingent on the Hartford health insurer devisting its Medicare Part D prescription drug plans with a subsidiary of WellCare Health Plans Inc. The drug plans cover about 2.2 million members. CVS reported it completed the divestiture to WellCare Health on Nov. 30.

DOJ at the time said the sale would "fully resolve" its competitive concerns.

However, Leon at a hearing Monday said he is "concerned" the DOJ agreement may breach certain antitrust issues. Leon's primary role in this case is to ensure the deal is in the best interest of the public.

Federal courts, under the Tunney Act, settle the majority of antitrust concerns for deals DOJ inks with merging companies. But companies seldom wait for court approval before completing their mergers and acquisitions.

The law doesn't prevent companies from integrating during the settlement review, but companies moving forward prematurely run the risk of revising their government agreement or unwinding their merger.

"Requiring CVS to hold the Aetna assets separate would also delay any efficiencies that the merger might produce and, under the circumstances of this case, create unnecessary uncertainty for consumers, employees and shareholders," DOJ said in a status update.

Comments
Free E-Newsletters

Sign up now for our daily and weekly
e-newsletters! Click Here

 
Today's Poll Do you plan to see 'Hamilton' at the Bushnell?<>
ADVERTISEMENTS
Most Popular on Facebook
Copyright 2017 New England Business Media