Judge Orders CVS and Aetna To Stay Separate for Now
The huge proposed merger between the insurer Aetna and pharmacy giant CVS Health Corp is on hold for now.
On December 3rd, a federal judge took the unusual step of blocking the consolidation, directing that the two entities keep their management separate. U.S. District Judge Richard Leon will hold another hearing on December 18th to decide the fate of the $70 billion merger.
So far, the proposed consolidation has withstood antitrust concerns. The merger is being touted as a sweeping step to transform the U.S. healthcare system, according to the two principals.
Can a Federal Judge Hold Up the Merger?
At this time, it is not clear whether the judge is able to prevent the giant integration. The two companies will be able to present arguments through December 14th on why they shouldn’t have to postpone their consolidation.
Judge Leon had previously conveyed to the companies as well as the Justice Department that he didn’t favor their “rubber-stamp approach” to his perceived role in the merger. The judge had identified anti-competitive concerns and the lengthy concerns of the American Medical Association as factors in his decision to hold off the merger.
However, the Department of Justice claims that the Tunney Act, antitrust legislation passed in 1972, does not give a federal judge the power to halt the integration of CVS and Aetna. The DOJ further argues that it may even be a constitutional violation to have a court infringe on the executive branch’s exercise of prosecutorial power, according to an article in Modern Healthcare.
Any delay in finalizing the deal will be costly. Cost-savings in terms of new business strategies and near-term synergies won’t be realized while the merger remains on hold.
Five states had joined the Justice Department in suing to stop the consolidation; these have all signed off on the merger plan.
Stay tuned for updates on the CVS Aetna merger.
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