CVS Health and Aetna to sell part of their Medicare drug plan businesses to WellCare Health Plans

CVS Health and Aetna have reached an agreement to sell part of their Medicare drug plan businesses to WellCare Health Plans.

The divestitures are part of the firms' effort win regulatory approval from the Trump administration for their $69 billion merger.

For WellCare, the transaction would mark the third deal in just over two years, after buying Universal American in 2017 and completing its acquisition of Meridian Health earlier this month. The insurer has a well-established Medicaid business, serving nearly three million people in the government safety net health plan, but it has been increasingly focused on growing its membership in Medicare plans for seniors.

The divestitures could help CVS and Aetna clear a major hurdle for approval from the Department of Justice, but it's no guarantee. Two years ago, the DOJ still blocked Aetna's proposed $37 billion acquisition of Humana, despite an offer from the firms to divest part of their overlapping Medicare Advantage businesses covering nearly 300,000 people in a sale to Molina Health, on the grounds that their merger would be anti-competitive.

New York's top insurance regulator has raised objections to the CVS-Aetna merger that go beyond concerns about market concentration in Medicare Part D, in comments to Connecticut regulators where a hearing on the deal is scheduled for October 4th.

"We are concerned with the considerable amount of debt – over $40 billion – that CVS is taking on to finance this transaction," wrote Maria Vullo, the superintendent of New York State's Department of Financial Services, adding that she worries "the considerable pressure to repay debt would cause the resulting company to repay its substantial obligation before investing in pro-market and pro-consumer measures."

The New York regulator also raised concerns the vertical integration of CVS' pharmacy benefits business with Aetna's insurance plan would put smaller insurers at a disadvantage in the PBM market. But federal antitrust regulators are not as worried about competition among PBMs. Earlier this month, the DOJ approved Cigna's $54 billion acquisition of pharmacy benefit firm Express Scripts, without concessions.

Assistant Attorney General Makan Delrahim said he did not believe that the merger would negatively impact the PBM market and that the deal was "unlikely to result in harm to competition or consumers."

CVS' deal involves far more moving parts, with the company's aim of leveraging its retail pharmacies and in-store clinics to provide more integrated care.

This is breaking news. Please check back for updates.

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