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August 07, 2018 at 07:40 PM
CVS Health Corp. has dodged one hurdle in its bid to buy insurer Aetna Inc., as antitrust enforcers don’t see competitive problems that can stem from uniting companies that operate at different levels of a supply chain, according to two people familiar with the matter.
That question has hung over the deal since it was announced last year because the Justice Department under President Donald Trump has raised the bar for approving such transactions, which are known as vertical deals because they don’t combine direct competitors.
The investigation by the Justice Department’s antitrust division hasn’t turned up vertical-competition concerns from the merger, according to the people, who declined to be identified because the review is confidential. Instead, the government is focused on competition between the companies in the prescription-drug market, the people said.
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CVS’s $68 billion deal to buy Aetna was announced on the heels of the Justice Department’s unsuccessful lawsuit to block AT&T Inc.’s takeover of Time Warner Inc., a vertical deal that combined a pay-TV distributor with a programmer. That case was a warning shot that enforcers were suddenly taking a tougher stand on such tie-ups.
The Aetna acquisition would combine the U.S. drugstore giant with the third-biggest health insurer. CVS also manages drug-benefits plans for employers and insurers, a business that could help steer some of Aetna’s 22 million customers into CVS drugstores when they fill a prescription.
It’s one of two health care transactions that are poised to reshape the industry. The other is insurer Cigna Corp.’s planned purchase of Express Scripts Holding Co., a pharmacy-benefit manager. That deal is facing opposition from activist investor Carl Icahn, who has acquired a stake in Cigna.
The Justice Department and Aetna declined to comment. CVS declined to comment other than to say it was continuing to work productively with the antitrust division’s staff. The government’s focus on prescription drugs was earlier reported by the Capitol Forum.
