Tuesday, December 26, 2017

CVS-Aetna merger is a robber baron's dream come true

Predicting a merger’s effect on consumers and competition is usually difficult. But in the case of the recently announced $69-billion merger of CVS Health Corporation and Aetna, we have hard evidence from previous health-care mergers that indicate this combination is a bad deal for consumers and competition.

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If this pharmacy and pharmacy benefit manager (“PBM”) giant and insurance company are allowed to join forces, the results will be higher prices and less choice for payors and consumers. The antitrust cops should just say no to this deal.

History can teach important lessons that undermine CVS’ claims that consumers will win from this deal. Look at CVS’ acquisition of Caremark, one of the nation’s dominant PBMs.

Tyrone's commentary:

If integrating the medical and pharmacy benefit requires that you relinquish flexibility and cost controls, the disadvantages of integration far outweigh the advantages. Disadvantages may include:
  • Plan members may pay U&C (usual and customary) prices, which are higher than discounted prices
  • Formulary and rebate arrangements may not be available or are significantly limited
  • Plan sponsors lack authority and flexibility and are typically unable to adjudicate plan limitations, plan exclusions, enforce generic dispensing mandates or validate appropriate drug pricing
There’s already a lack of transparency when it comes to drug prices and employers may have even less information if the insurer and the pharmacy benefit manager are the same entity. It’s going to be harder to get behind the curtain.

CVS, a retail pharmacy giant, took advantage of vertical integration through its acquisition of Caremark, a PBM giant, by excluding competition, reducing patient access to vital healthcare services from the pharmacists of choice and driving up prices.

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