FTC May Pluck CVS-Caremark Merger For A Second Bite Of Merger Review

The completed CVS-Caremark merger may be the first fruit to be plucked by federal antitrust enforcers who have indicated a willingness to take second bites at the apple of merger review.

Antitrust enforcers in the new administration have expressed an interest in re-examining previously approved mergers to ensure that competition was not compromised.  Christine A. Varney, Assistant Attorney General in charge of Antitrust at the Department of Justice, has stated that she is “absolutely” open to reviewing the effects of mergers approved under the previous administration.  No statute of limitations exists on mergers.  The DOJ under the most recent Bush administration filed suit against a company, Microsemi, seeking to undo its acquisition of competitor Semicoa Inc, and it seems likely that there will be more to come under the current administration.

The March 2007 merger of CVS drugstores with pharmacy benefits manager Caremark RX has been criticized by both lawmakers and various public interest groups.  In July 2009, various US Senators wrote to FTC Chairman John Leibowitz requesting the FTC to reexamine the merger of CVS and Caremark to determine whether the combined entity has engaged in anticompetitive practices.  (Letters are available here and here).  The National Community Pharmacists Association issued a statement that prices are higher under the combined company.  The FTC is conducting a “non-public investigation” into CVS, which has revealed in a recent SEC filing that it is producing documents and other information in compliance with that investigation.

The healthcare industry has significantly consolidated over the past decade and special interest groups have sought re-review of some of these mergers, including the American Hospital Association requesting an investigation into health insurance plan mergers, and the American Medical Association seeking a discussion regarding the same issue of competition in health insurance.