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Analysis

California OKs CVS Aetna Merger

By John Commins  
   November 16, 2018

The next big hurdle for the mega-merger will be in New York, where regulators have threatened to block the deal unless the companies agree not to raise premiums and submit their PBM to state oversight.

California has approved CVS Health Corp.'s $69 billion acquisition of Aetna Inc.

The go-ahead came this week after the two companies agreed to pump $240 million into the California's healthcare infrastructure and guarantee against premium hikes to cover the cost of the deal.

"The Department thoroughly examined this merger and determined enrollees will have continued access to appropriate healthcare services and also imposed conditions that will help increase access and quality of care, remove barriers to care and improve health outcomes," Shelley Rouillard, director of California's Department of Managed Health Care, said in a media release.

The go-ahead marks another big hurdle cleared for a merger that many observers believe could fundamentally change healthcare delivery in the United States and pose a direct challenge to traditional care providers.

The U.S. Department of Justice approved the deal in October, with the stipulation that Aetna sell its Medicare Part D business to WellCare Health Plans.

CVS said earlier this month that it hopes to complete the deal by Thanksgiving.

However, one of the last major state regulatory hurdles is in New York. That state's Department of Financial Services is expected to issue a decision on the merger in the coming weeks, after threatening last month to block the merger unless the companies agreed not to raise premiums and to submit their pharmacy benefits manager to state regulation.  

CVS Health and Aetna did not return requests Friday for comment.

In addition to their pledge not to raise premiums to cover the acquisition costs, CDMHC said CVS and Aetna agreed to "keep premium rate increases to a minimum," and to invest nearly $240 million in California's healthcare delivery system.

This includes:

  • $166 million to support California's healthcare infrastructure and employment, including building and improving facilities in the state.
     
  • $22.8 million to increase the number of providers in underserved by funding scholarships and loan repayment programs.
     
  • $22.5 million to support joint ventures and accountable care organizations, and value-based pay for performance to improve clinical quality, resources and patient experience.
     
  • $6 million to support efforts to provide accurate and accessible provider directories, and standardize and improve the quality of encounter data.
     
  • $5.55 million to expand the California Quality Collaborative Practice Transformation Initiative to increase access and healthcare quality for underserved areas.
     
  • $3 million to provide free dental care to underserved patients.
     
  • $3 million in consumer assistance to seniors, people with disabilities, and Medi-Cal/Medicare dual eligibles.
      
  • $3 million to expand Project Health to CVS Pharmacy locations across California, which provides free preventative services.
     
  • Improve enrollee care through rating and oversight programs under the DMHC and Office of the Patient Advocate, including a $3 million investment to that end.
     
  • $1.65 million to integrate emergency medical services providers into community opioid treatment and prevention programs, and to expand a pilot community paramedic project.
     
  • $1.5 million to support programs that address the social determinants of health.
     
  • $750,000 to implement programs to help address the opioid crisis. CVS will also stock Naloxone in all CVS pharmacies in California and provide training on the drug.

John Commins is a senior editor at HealthLeaders.


KEY TAKEAWAYS

The two companies agree not to raise premiums in California to cover acquisition costs.

The approval comes with a $240 million price tag to fund California healthcare infrastructure improvements.

CVS and Aetna hope to complete the deal by Thanksgiving, but they await approval from New York State.


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