Consumers Union Skeptical of Consumer Benefits of CVS-Aetna Merger in Hearing Testimony
Tuesday, February 27, 2018
WASHINGTON, D.C. — George Slover, senior policy counsel for Consumers Union, the advocacy division of Consumer Reports, will testify today in a House Judiciary subcommittee hearing on the potential consumer harms of the proposed merger between CVS Health and Aetna. His testimony will focus on the potential for new types of consolidation posed by the combination of CVS Health, the second largest retail pharmacy chain and the largest pharmacy benefits manager (PBM), and Aetna, the third largest health insurer, that could ultimately reduce meaningful choice in the market.
Consumers Union’s testimony also casts doubt on the companies’ promises that the efficiencies created by the merger would result in savings for consumers.
“Combining these two giants would create an even bigger giant with a vested interest in almost every step of the supply chain. Perhaps more importantly, a combined CVS Health and Aetna would create an entirely new corporate structure, straddling more market sectors and creating new and potentially far-reaching profit-maximizing incentives,” said Slover. “Companies seeking to merge typically promise the consumer benefits of ‘efficiencies,’ but history has ultimately shown these are often unsubstantiated or exaggerated. This type of consolidation in a market already dominated by few, powerful players, presents the very real possibility of reduced competition that harms consumer choice and quality.”
The testimony outlines potential scenarios where a combined CVS-Aetna might be able to exert its influence over the market in ways that harm competition and consumers. For example, CVS-Aetna might decide to tell Aetna policyholders that their coverage only applies if they go to a CVS Minute Clinic, not to a perhaps better, and equally or more affordable, more conveniently located, walk-in clinic run by someone else. Or CVS-Aetna might find it to its advantage for CVS Caremark to negotiate different, better deals on prescription drugs only for those who pay with Aetna insurance, or only for those who fill them at CVS.
Slover said, “CVS-Aetna could find it profitable to use its combined resources to make it harder for its rivals to get what they need, or harder for them to reach consumers, or to otherwise interfere in their efforts to compete effectively. And because of the black box surrounding PBM rebates and side agreements, this area is particularly vulnerable to anticompetitive abuse. If their competitors at that other level don’t have meaningful options, that translates into less choice at all levels up and down the chain – including, ultimately, less choice and likely higher costs for consumers.”
The full testimony is available here. The hearing, “Competition in the Pharmaceutical Supply Chain: The Proposed Merger of CVS Health and Aetna” is scheduled for 1:30 p.m. on Tuesday, February 27. For more information, please visit www.judiciary.house.gov.