Aetna Inc. and CVS Health Corp. asked Connecticut regulators Thursday to approve their $69 billion merger with pledges to reshape health care as a grassroots service that puts consumers first.
The acquisition of Aetna by CVS would represent a new direction in the changing health care industry. CVS began with storefront pharmacies and developed into a pharmacy benefits manager. For Aetna, it could be a major step toward a digital business using its store of data and playing a critical role in personalized health.
“Health care, like politics, is local,” Tom Moriarty, executive vice president and general counsel of CVS, told an Insurance Department panel at a public hearing.
CVS already has a broad presence in Connecticut, he said, and its acquisition of Aetnais a “natural extension of our commitment to put consumers at the center of their health care,” he said.
Karen Lynch, president of Aetna, said the tie-up with CVS is the “next and most important step to put consumers at the center of their care.”
However, two Georgia State University economists who filed an analysis of the deal with the Insurance Department said they cannot determine the ultimate consumer impact of the deal.
“We cannot predict with a high level of confidence how the proposed merger would affect prices or the quality of care in the relevant markets,” economists William Custerand Robert Klein said.
As a result, they said they cannot predict with “a high level of confidence whether the proposed merger would increase, decrease, or have no effect on consumer welfare.”
Nathan Tinker, chief executive officer of the Connecticut Pharmaceutical Association, said the combination of the two giant companies will drive small drug stores out of business, depriving consumers of choice and failing to push down costs.
The CVS acquisition of Aetna is “tantamount to letting the fox into the hen house,” he said.
CVS told Connecticut insurance regulators Wednesday it will keep Aetna in Hartford for at least 10 years as part of its $69 billion acquisition of the health insurer.
In addition, the number of employees at Aetna and its Connecticut subsidiaries will remain about 5,300 for at least four years after the deal closes.
Insurance Commissioner Katharine Wade said in an interview before the hearing that the agreement is “part of the process.”
“It’s pretty standard to get commitments,” she said.
The four-year jobs pledge is standard, but the 10-year commitment required some negotiation, Wade said, without elaborating.
Carolyn Castel, a spokeswoman for CVS, said in an email that a “substantial number of states” have approved the deal, but she would not say how many or which states.
Some states prefer to wait for a decision by the Department of Justice before making their approval final, she said. As a result, CVS expects that states will approve the deal after federal officials act, she said.
John Perra, chairman of the Aetna Retirees Association, said in a letter to state regulators that the group is concerned the proposed acquisition “may again imperil retiree benefits.”
In an interview published in the New York TimesSept. 21, Aetna Chief Executive Officer Mark Bertolini said he did not know the answer to a question about whether Aetna’s culture will “survive after the sale to CVS.”
“When we were getting near signing the merger agreement, they wanted to change our benefits immediately. I said, ‘No. You can do whatever you want to the executives, everybody is going to do really well. But not the front line employees,'” Bertolini said.
“So I don’t know,” he said.
Perra told regulators it is “quite worrisome” to retirees that Bertolini does not know what may happen to benefits though CVS talked in merger negotiations about change to Aetna benefits.
CVS said in January it will keep Aetna in Hartford, where it has been headquartered since 1853.
Shareholders of Aetna and CVS approved the deal in March.
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