What a judge can — and can’t — do in ruling on the Justice Department’s deal with CVS and Aetna

A federal judge is considering halting the integration of CVS Health and Aetna — even though the two companies closed their merger last week.

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                                                                                                        Judge Richard Leon of the U.S. District Court for the District of Columbia in a hearing Monday floated the idea that CVS and Aetna keep their companies separate until he can determine whether the agreement the Justice Department struck with the companies clears anti-competitive concerns, according to a transcript of the hearing. He pointed to concerns from groups like the American Medical Association, which have urged regulators to block the deal, saying the combination would reduce competition and leave consumers worse off.  

                                                                                                                                                                The Justice Department in October said it would require CVS and Aetna to resolve overlap between their Medicare Part D plans in order to approve their roughly $70 billion deal. To satisfy these concerns, Aetna sold its business to WellCare Health Plans.

                                                                                                                                    When the Justice Department strikes an agreement with companies, a federal judge must clear it. This step has become somewhat procedural, with judges rarely questioning or opposing the terms. Companies typically don't wait for a judge to rule before closing a deal. So while it's not unusual for CVS to have already completed its acquisition of Aetna, it is unusual for a judge to consider keeping the companies from integrating while he completes his review.

                                                                                                                                                                "Unusual is almost too light of a word," said Andrea Agathoklis Murino, a partner in and co-chair of Goodwin's antitrust and competition law practice. "I can't recall another instance of a judge doing this."

                                                                                                                                                                Enacted in 1974, the Tunney Act slows the merger process down and adds a layer of oversight in cases where the Justice Department negotiates with the companies seeking to combine. The law created a 60-day comment period and gave judges the final say on whether the agreements made are in the public's best interest.

                                                                                                                                                                Under the law, judges can conclude that the remedy proposed does not address anti-competitive concerns outlined in the complaint, said Jim Tierney, a partner in Orrick's antitrust practice. They can't, however, block the entire merger.

                                                                                                                                                                That means in the CVS-Aetna case specifically, Leon can decide whether the agreement the Justice Department struck with CVS and Aetna on their Medicare Part D businesses addresses anti-competitive issues, Tierney said. He can find the agreement sufficiently clears these concerns or not. If he finds it does not, the companies can renegotiate with the Justice Department or appeal the ruling.

                                                                                                                                                                Leon on Monday said he would issue an order for CVS and Aetna to keep their companies separate until he makes his ruling. He ordered the companies to submit filings by Dec. 14 and called another hearing Dec. 18.

                                                                                                                                                                <a href="https://www.cnbc.com/2018/11/28/cvs-creates-new-health-care-giant-as-69-billion-aetna-merger-closes.html">CVS and Aetna closed</a> their roughly $70 billion deal on Nov. 28.

                                                                                                                                                                "CVS Health and Aetna are one company, and our focus is on transforming the consumer health experience," CVS said in a statement.
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