Will the CVS-Aetna merger expand – or limit – health care in New York?

CVS pharmacy
CVS pharmacy
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Shoppers walk past a CVS drug store in New York City.

Will the CVS-Aetna merger expand – or limit – health care in New York?

The approved deal is at the center of a debate over the role of corporations in providing health care.
October 10, 2018

In New York, state law puts limits on how involved corporations can be in providing health care to patients. But CVS Health Corporation’s recent agreement to buy Aetna for $69 billion has heightened concerns about the future of for-profit health care in the state.

Those concerns became even more urgent on Wednesday when the U.S. Justice Department approved the deal with the stipulation that Aetna divest its individual prescription drug plan business. Aetna has agreed to the condition.

Under New York’s corporate practice of medicine law, business corporations are prohibited from offering the services of licensed professionals or authorized professional organizations, making decisions about the delivery of professional services, or sharing profits with licensed professionals. The legislation includes medical practitioners.

Some health organizations and state legislators believe that the CVS-Aetna merger will undercut state law by allowing a corporation to directly influence patient care. The Medical Society of the State of New York, along with American Medical Association, has opposed the merger on the grounds that it would give the combined companies too large of a market share in the health care market, increase prices for members and ultimately reduce options available to consumers by threatening local pharmacies and physicians.

Despite the fears about fewer options, CVS is aiming to increase the number of CVS retail clinics known as “MinuteClinics.” Retail clinics, which are typically located inside of a retail store, address illnesses and ailments that are less serious than those treated in hospitals or urgent care clinics. Nationally, CVS had 1,134 MinuteClinics at the end of 2017, but if the merger should occur, there are a total of 9,700 stores where new retail clinics might be opened.

“The premise behind this consolidation is that CVS – using their retail clinics and their stores – is going to make health care more accessible,” Dr. Thomas Madejski, president of the Medical Society of the State of New York, told City & State. However, he said, “there's really not that much data to support that. They may be able to make it more accessible, but that really has not translated to any improvement in outcomes nor to better patient care. And, actually, there are some studies that show that retail clinics actually cost more without any improvement.”

Not everyone agrees. Gov. Andrew Cuomo came out in support of retail clinics in his 2019 executive budget proposal earlier this year. “Studies have shown that retail clinics are 40‐80 percent less expensive than alternate sites of care while providing commensurate quality,” his briefing book reads. “Retail practices offer extended hours with no appointment needed, increasing access to primary care services and providing an alternative to emergency room care.” State Senate Health Committee Chairman Kemp Hannon said in January that he supports Cuomo’s plan.

Madejski noted that although more retail clinics would increase the number of health care options, patients could end up being subjected to overtreatment and have fragmentation of care.

Assemblyman Kevin Cahill, who is the chairman of the Assembly Committee on Insurance, is also opposed to retail clinics and is against the CVS-Aetna merger. He has been calling on the state Department of Health and the state Department of Financial Services to scrutinize CVS’s plan to buy Aetna since it was first announced in December of 2017. When both departments chose not to attend a June 2018 public hearing on the matter, the assemblyman voiced his disappointment. “The lack of involvement in this process by the state Departments of Health and Financial Services are of serious concern,” he said. “They have regulatory jurisdiction and responsibility over significant aspects of this plan. Their failure to attend today’s hearing leads to the conclusion that either they lack respect for the legislative branch or are asleep at the switch.”

According to Cahill, one of the purposes of the hearing was to determine what legislation, if any, would be appropriate given the concerns about the merger. However, without the agencies in attendance, the Assembly was not able to get their input. “One thing we will be doing independent of whatever happens in Washington with CVS and Aetna is looking heavily into the regulation of pharmacy benefit management companies,” he told City & State last week prior to the federal approval of the merger. “They have been allowed to carry on a great deal of what we previously held insurance companies responsible for, and there’s some sense that their activities are shielded from the regulatory view and that therefore consumers are not adequately protected.”

In addition to being the largest retail pharmacy chain and specialty pharmacy in the United States, CVS is one of the U.S.’s two largest pharmacy benefit managers. Pharmacy benefit managers seek to negotiate lower drug costs for insurers and insurance companies. “If one insurance company owns a pharmacy benefit manager that was providing services to 40 percent of the insured population,” Cahill said, “that would be a very large potential conflict.”

Lawmakers are also considering whether to further regulate contracting between insurance companies and their providers. “We have operated on the assumption – and I think rightfully so – that the relationship between providers and the insurers is an arms length relationship. Once they are owned by the same company, that’s not true anymore,” the assemblyman said.

Ahead of an early October hearing in Connecticut about the merger, the New York State Department of Financial Services Superintendent Maria Vullo outlined a number of concerns regarding the merger, including the possibility of negative effects on competition, increased premiums, drug prices and data privacy issues and the over the debt the company will take on to finance the transaction. “The proposed acquisition of Aetna by CVS will affect millions of consumers in Connecticut and New York, as well as the rest of the country,” she wrote in a letter to Connecticut Insurance Commissioner Katharine L. Wade.

Nonetheless, CVS is confident that acquiring Aetna will be a benefit to its customers. “Together, we will help address the challenges our health care system is facing, and we'll be able to offer better care and convenience at a lower cost for patients and payors," CVS Health President and Chief Executive Officer Larry J. Merlo said in a statement following the DOJ approval. With the DOJ behind it, the merger is expected to close by the end of 2018.

Christina Saint Louis
is an editorial intern at City & State.
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