[Federal Register Volume 83, Number 201 (Wednesday, October 17, 2018)]
[Notices]
[Pages 52558-52569]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22665]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. CVS Health Corporation and Aetna Inc.; Proposed
Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the District of Columbia in United
States of America v. CVS Health Corporation and Aetna Inc., Civil
Action No. 1:18-cv-02340. On October 10, 2018, the United States filed
a Complaint alleging that CVS Health Corporation's proposed acquisition
of Aetna Inc. would violate Section 7 of the Clayton Act, 15 U.S.C. 18.
The proposed Final Judgment, filed at the same time as the Complaint,
requires the merging parties to divest Aetna's individual prescription
drug plan business.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's website at http://www.justice.gov/atr and at the Office of
the Clerk of the United States District Court for the District of
Columbia. Copies of these materials may be obtained from the Antitrust
Division upon request and payment of the copying fee set by Department
of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to Peter Mucchetti,
Chief, Healthcare and Consumer Products Section, Antitrust Division,
Department of Justice, 450 Fifth Street NW, Suite 4100, Washington, DC
20530 (telephone: 202-307-0001).
Patricia A. Brink,
Director of Civil Enforcement.
United States District Court for the District of Columbia
United States Of America, U.S. Department of Justice, Antitrust
Division, 450 5th Street NW, Suite 4100, Washington, DC 20530, State
of California, 455 Golden Gate Avenue, Suite 11000, San Francisco,
CA 94102, State of Florida, PL-01, The Capitol, Tallahassee, FL
32399-1050, State of Hawaii, 425 Queen Street, Honolulu, HI 96813,
State of Mississippi, P.O. Box 22947, Jackson, MS 39225, and State
of Washington, 800 Fifth Avenue, Suite 2000, Seattle, WA 98104-3188,
Plaintiffs, v., CVS Health Corporation, 1 CVS Drive, Woonsocket, RI
02895, and AETNA Inc., 151 Farmington Avenue, Hartford, CT 06156,
Defendants.
Case No. 1:18-cv-02340
Judge Richard J. Leon
COMPLAINT
The United States of America, acting under the direction of the
Attorney General of the United States, and the States of California,
Florida, Hawaii, Mississippi, and Washington (``Plaintiff States''),
bring this civil antitrust action to prevent CVS Health Corporation
from acquiring Aetna Inc.
I. Introduction
1. CVS's proposed $69 billion acquisition of Aetna would combine
two of the country's leading sellers of individual prescription drug
plans, also known as individual PDPs. More than 20 million
individual beneficiaries--primarily seniors and persons with
disabilities--rely on these government-sponsored plans for
prescription drug insurance coverage. Competition between CVS and
Aetna to sell individual PDPs has resulted in lower premiums, better
service, and more innovative products. The proposed acquisition
would eliminate this valuable competition, harming beneficiaries,
taxpayers, and the federal government, which pays for a large
portion of beneficiaries' prescription drug coverage.
2. While CVS and Aetna compete throughout the United States,
they are particularly strong in 16 geographic regions established by
the Centers for Medicare & Medicaid Services (``CMS''). In these 16
regions, over 9.3 million people are enrolled in individual PDPs.
Competition between CVS and Aetna is particularly important in these
regions because they compete for similar customers by lowering
prices and improving products. Moreover, they are two of the largest
and fastest-growing competitors. Individuals in these 16 regions
will experience harm, including price increases and quality
reductions, from the loss of competition between CVS and Aetna.
3. Because the transaction likely would substantially lessen
competition between CVS and Aetna for individual PDPs in these 16
regions, the proposed acquisition violates Section 7 of the Clayton
Act, 15 U.S.C. Sec. 18, and should be enjoined.
II. Background
A. Medicare Drug Coverage
4. Medicare is a federal program that provides health insurance
to qualified beneficiaries. Medicare offers coverage for outpatient
prescription drugs under the Medicare Part D program, which
harnesses competition between private insurance companies in order
to lower prescription drug costs for Medicare beneficiaries and
taxpayers, enhance plan designs, and improve quality of coverage.
5. Medicare beneficiaries obtain individual drug coverage in two
main ways, depending on the type of medical insurance they have.
Beneficiaries enrolled in Original Medicare, a fee-for-service
program offered directly through the federal government, can enroll
in a standalone individual PDP. Beneficiaries enrolled in Medicare
Advantage, a type of private insurance offered by companies that
contract with the federal government, can enroll in a plan that
includes drug coverage.
6. No matter how beneficiaries obtain Medicare drug coverage,
the federal government subsidizes the cost of that coverage. As
explained in greater detail below, the federal government also
provides additional subsidies to low-income beneficiaries under the
low-income subsidy (``LIS'') program.
B. Individual PDPs
7. Individual PDPs provide beneficiaries with insurance coverage
for a set of prescription drugs (the ``formulary''), a network of
pharmacies where beneficiaries may fill prescriptions, and a set
schedule of defined premiums and cost-sharing rates.
8. To offer individual PDPs, insurers must be approved by CMS.
CMS has divided the 50 states and the District of Columbia into 34
Part D regions. To offer an individual PDP in a Part D region, the
insurer must offer the plan at the same price to all individuals in
the region and have a pharmacy network that is adequate to serve
individuals throughout the region. No Part D region is smaller than
a state, and some Part D regions encompass multiple contiguous
states. Beneficiaries can enroll only in individual PDPs offered in
the Part D region where they reside. The following map shows the
Part D regions:
[[Page 52559]]
[GRAPHIC] [TIFF OMITTED] TN17OC18.027
9. Within each Part D region, an insurer may generally offer up
to three individual PDPs. An insurer must offer one ``basic''
individual PDP that is actuarially equivalent to the minimum
coverage required by statute but may vary in terms of premiums,
deductibles, formularies, and pharmacy networks. Insurers may also
offer up to two ``enhanced'' individual PDPs that provide additional
coverage compared to the insurer's basic individual PDP.
10. Individual PDPs vary in terms of premiums, cost sharing,
drug formularies, pharmacy networks, and other characteristics.
Insurers can use these different plan designs to target different
types of Medicare beneficiaries based on their health, income, price
sensitivity, and other factors.
11. Each fall, Medicare has an annual open-enrollment period in
which beneficiaries may change their individual PDP. When comparing
plans, beneficiaries consider a number of factors, including
premiums, cost sharing, whether their drugs are on the formulary,
and whether their preferred pharmacies are in network.
C. The Low-Income Subsidy Program
12. Most low-income beneficiaries do not have to pay a premium
for their individual PDP because Medicare pays their premium up to a
certain threshold called the ``LIS benchmark.'' Under CMS rules,
beneficiaries eligible for the low-income subsidy who do not
affirmatively select an individual PDP or a Medicare Advantage plan
(``auto-enrollees'') are automatically enrolled in a basic
individual PDP, but only one that has premiums set below the
regional LIS benchmark. These auto-enrollees are assigned in
proportion to the number of basic plans below the LIS benchmark. For
example, if three basic individual PDPs are below the LIS benchmark
in a Part D region, then each plan receives a third of new auto-
enrollees in that region.
13. The LIS benchmark has important consequences for insurers.
As long as an insurer's individual PDP remains below the LIS
benchmark each year, the plan keeps its existing auto-enrollees and
is eligible to receive a portion of new auto-enrollees. If an
insurer's basic individual PDP is priced over the LIS benchmark,
however, then it generally loses all of its auto-enrollees and is
not eligible to receive any new auto-enrollees that year. The one
exception is when an insurer's monthly premium is within a de
minimis amount, currently $2, above the LIS benchmark, in which case
the insurer can keep its auto-enrollees if it waives the premium
amount above the LIS benchmark, but the insurer is not eligible to
receive any new auto-enrollees. If an insurer loses its auto-
enrollees, its beneficiaries are reassigned to an individual PDP
below the LIS benchmark in the same manner that new auto-enrollees
are assigned.
14. As with the Part D program generally, the LIS program is
designed to promote competition between insurers to lower costs for
beneficiaries and taxpayers.
III. The Defendants and the Merger
15. CVS, based in Woonsocket, Rhode Island, is one of the
largest companies in the United States. It operates the nation's
largest retail pharmacy chain; owns a large pharmacy benefit manager
called Caremark; and is the nation's second-largest provider of
individual PDPs, with over 4.8 million members. CVS offers
individual PDPs under the brand name SilverScript in all 50 states
and the District of Columbia. In 2017, CVS earned revenues of
approximately $185 billion.
16. Aetna, based in Hartford, Connecticut, is the nation's
third-largest health-insurance company and fourth-largest individual
PDP insurer, with over 2 million individual PDP members. Like CVS,
Aetna offers individual PDPs in all 50 states and the District of
Columbia. In 2017, the company earned revenues of $60 billion.
17. On December 3, 2017, CVS agreed to acquire Aetna for
approximately $69 billion.
IV. Jurisdiction and Venue
18. The United States brings this action, and this Court has
subject-matter jurisdiction over this action, under Section 15 of
the Clayton Act, 15 U.S.C. Sec. 25, to prevent and restrain the
defendants from violating Section 7 of the Clayton Act, 15 U.S.C.
Sec. 18.
19. The Plaintiff States bring this action under Section 16 of
the Clayton Act, 15 U.S.C. Sec. 26, to prevent and restrain the
defendants from violating Section 7 of the Clayton Act, 15 U.S.C.
Sec. 18. The Plaintiff States, by and through their respective
Attorneys General, bring this action as parens patriae on behalf of
and to protect the health and welfare of their citizens and the
general economy of each of their states.
20. Defendants are engaged in, and their activities
substantially affect, interstate commerce. CVS and Aetna sell
individual PDPs, as well as other products and services, to numerous
customers located throughout the United States and that insurance
covers beneficiaries when they travel across state lines.
[[Page 52560]]
21. This Court has personal jurisdiction over each defendant
under Section 12 of the Clayton Act, 15 U.S.C. Sec. 22. CVS and
Aetna both transact business in this District.
22. Venue is proper in this District under Section 12 of the
Clayton Act, 15 U.S.C. Sec. 22, and under 28 U.S.C. Sec. 1391.
Defendants have also consented to venue and personal jurisdiction in
the District of Columbia.
V. The Relevant Markets
A. The Sale of Individual PDPs Is a Relevant Market
23. The sale of individual PDPs is a relevant market and line of
commerce under Section 7 of the Clayton Act.
24. For the vast majority of beneficiaries enrolled in
individual PDPs, the main alternative for prescription drug
coverage--Medicare Advantage plans that include drug coverage--is
not a close substitute. Beneficiaries who have enrolled in an
individual PDP have, by definition, chosen Original Medicare over
Medicare Advantage. These beneficiaries rarely switch between the
two programs, and they are even less likely to switch to obtain
alternative prescription drug coverage. Indeed, only about two
percent of individual PDP members convert to Medicare Advantage
plans each year during open enrollment, and an even smaller
percentage of individuals convert from Medicare Advantage plans to
individual PDPs.
25. Because Medicare Advantage is not a close substitute for
beneficiaries enrolled in individual PDPs, CVS, Aetna, and other
industry participants treat individual PDPs as distinct from other
products. For example, CVS offers individual PDPs but does not offer
Medicare Advantage plans. Insurers that offer Medicare Advantage
plans and individual PDPs, including Aetna, separately monitor and
report their individual PDP enrollment, premiums, benefits, market
share, and financial performance, both internally and to investors.
26. For these reasons, individual PDPs satisfy the well-accepted
``hypothetical monopolist'' test set forth in the U.S. Department of
Justice and Federal Trade Commission's 2010 Horizontal Merger
Guidelines. A hypothetical monopolist selling all individual PDPs
would likely impose a small but significant and non-transitory price
increase because an insufficient number of beneficiaries would
switch to alternatives to make that price increase unprofitable.
B. The relevant geographic markets are 16 Part D regions.
27. As noted, a Medicare beneficiary may enroll only in the
individual PDPs that CMS has approved in the Part D region where the
beneficiary resides. Therefore, competition in each Part D region is
limited to the insurers that CMS has approved to operate in that
region.
28. For the same reason, a hypothetical monopolist selling
individual PDPs in a specific Part D region could profitably impose
a small but significant and non-transitory price increase because an
insufficient number of beneficiaries would or could switch to
alternatives outside the Part D region to make that price increase
unprofitable.
29. As explained below, the proposed acquisition would likely
harm competition in 16 of the 34 Part D regions: Arkansas,
California, Florida, Georgia, Hawaii, Kansas, Louisiana,
Mississippi, Missouri, New Mexico, North Carolina, Ohio, Oklahoma,
South Carolina, Wisconsin, and the multistate region of Iowa,
Minnesota, Montana, Nebraska, North Dakota, South Dakota, and
Wyoming. Each of these Part D regions is a relevant geographic
market for the sale of individual PDPs.
VI. CVS's acquisition of Aetna will substantially lessen competition in
the sale of individual PDPs in 16 Part D regions.
30. Consumers will be harmed by the transaction in 16 Part D
regions covering 22 states. Over 9.3 million people are enrolled in
individual PDPs in the 16 regions, 3.5 million of whom have coverage
from CVS or Aetna.
31. The proposed acquisition would substantially lessen
competition and harm consumers by eliminating significant head-to-
head competition between CVS and Aetna. Indeed, throughout the
country, CVS and Aetna have been close competitors. For example, in
2016 and 2018, CVS found that individuals leaving its individual
PDPs went to Aetna more often than to any other competitor. CVS's
and Aetna's individual PDPs are also among the fastest growing
individual PDPs, with new-to-Medicare enrollees choosing CVS and
Aetna plans at rates higher than their current market shares.
32. CVS and Aetna have sought to win individual PDP customers in
various ways. For example, CVS and Aetna routinely consider each
other's prices and formularies when setting prices and coverage
amounts for their plans. This price competition between CVS and
Aetna drives them to lower premiums, copayments, coinsurance, and
deductibles.
33. CVS and Aetna have also sought to win individual PDP
customers from each other by improving the quality of their services
and coverage. This competition has led the companies to improve drug
formularies, offer more attractive pharmacy networks, and create
enhanced benefits for individuals. For example, in recent years,
Aetna has made several changes to improve the coverage of its
formulary and pharmacy networks to win business from CVS. That
competition gave beneficiaries access to certain drugs at more
affordable prices.
34. In 12 Part D regions--Arkansas, California, Florida,
Georgia, Hawaii, Kansas, Louisiana, Mississippi, Missouri, New
Mexico, Ohio, and South Carolina--CVS and Aetna will account for at
least 35 percent of individual PDP enrollment in highly concentrated
markets, making the merger presumptively anticompetitive. See United
States v. Anthem, Inc., 855 F.3d 345, 349 (D.C. Cir. 2017) (holding
that market concentration can establish a presumption of
anticompetitive effects).
35. In five of these Part D regions (Arkansas, Georgia, Kansas,
Mississippi, Missouri), as well as four additional regions (North
Carolina, Oklahoma, Wisconsin, and the multistate region of Iowa,
Minnesota, Montana, Nebraska, North Dakota, South Dakota, and
Wyoming), the merged company will account for 35 percent or more of
LIS-eligible beneficiaries. When combined with other market factors,
this share of low-income subsidiary beneficiaries will likely result
in an additional loss of competition. Competition between CVS and
Aetna in these regions has led them to lower premiums to be below
the regional LIS benchmarks and de minimis thresholds and thus
qualify for LIS auto-enrollees. These lower premiums have in turn
led to lower regional LIS benchmarks because the LIS benchmarks are
based on the premiums that CVS, Aetna, and other companies receive
for providing Medicare drug coverage. Lower LIS benchmarks reduce
taxpayer costs and costs to non-LIS beneficiaries who choose to
enroll in these plans.
36. If CVS acquires Aetna, these valuable forms of competition
will be lost, resulting in higher premiums for consumers and lower-
quality services. In addition, because the LIS benchmark is
calculated as an LIS-enrollment-weighted-average for each individual
PDP region, in Part D regions where CVS and Aetna have a high
percentage of LIS enrollees, the merged company would have a greater
ability to influence the LIS benchmark and will be incentivized to
increase its prices for individual PDPs. Higher prices increase the
amount that non-LIS beneficiaries pay as well as the subsidies that
the federal government pays for LIS enrollees. As a result, the
merger will likely increase costs to beneficiaries, the federal
government, and, ultimately, to taxpayers.
VII. Countervailing factors do not offset the anticompetitive effects
of the transaction.
37. Entry of new insurers or expansion of existing insurers into
the sale of individual PDPs in any Part D region is unlikely to
prevent or remedy the proposed merger's anticompetitive effects.
Effective entry into the sale of individual PDPs requires years of
planning, millions of dollars, access to qualified personnel, and
competitive contracts with pharmacies and pharmaceutical
manufacturers. Because of these barriers to entry, entry or
expansion into the sale of individual PDPs is unlikely to be timely
or sufficient to remedy the anticompetitive effects from this
merger.
38. The proposed merger is also unlikely to generate verifiable,
merger-specific efficiencies sufficient to outweigh the
anticompetitive effects that are likely to occur in the sale of
individual PDPs in the relevant Part D regions.
VIII. Violation Alleged
39. The effect of the proposed merger, if consummated, likely
would be to lessen competition substantially in the sale of
individual PDPs in each of the relevant Part D regions, in violation
of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
40. In the sale of individual PDPs in each of the relevant Part
D regions, the merger likely would:
(a) eliminate significant present and future head-to-head
competition between CVS and Aetna;
[[Page 52561]]
(b) reduce competition generally;
(c) raise prices to Medicare beneficiaries and taxpayers;
(d) reduce quality; and
(e) lessen innovation.
IX. Request for relief
41. Plaintiffs request that the Court:
(a) adjudge CVS's proposed acquisition of Aetna to violate
Section 7 of the Clayton Act, 15 U.S.C. Sec. 18;
(b) permanently enjoin and restrain the Defendants from carrying
out the planned acquisition or any other transaction that would
combine the two companies;
(c) award Plaintiffs the costs of this action; and
(d) award Plaintiffs other relief that the Court deems just and
proper.
Dated: October 10, 2018.
Respectfully submitted,
FOR PLAINTIFF UNITED STATES OF AMERICA:
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Makan Delrahim,
Assistant Attorney General for Antitrust.
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Bernard A. Nigro, Jr., (D.C. Bar #412357),
Deputy Assistant Attorney General.
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Patricia A. Brink,
Director of Civil Enforcement.
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Peter J. Mucchetti,
Chief, Healthcare and Consumer Products Section.
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Scott I. Fitzgerald,
Assistant Chief, Healthcare and Consumer Products Section.
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Jay D. Owen,
Jes[uacute]s M. Alvarado-Rivera
Don Amlin (D.C. Bar #978349)
Barry L. Creech (D.C. Bar #421070)
Justin M. Dempsey (D.C. Bar #425976)
Emma Dick
Matthew C. Hammond
John A. Holler
Barry Joyce
Kathleen S. Kiernan (D.C. Bar #1003748)
Daphne Lin
Cerin M. Lindgrensavage
Michael T. Nash
Andrew J. Robinson (D.C. Bar #1008003)
Rebecca Valentine (D.C. Bar #989607)
Bashiri Wilson (D.C. Bar #998075)
Attorneys for the United States,
U.S. Department of Justice, Antitrust Division, 450 Fifth Street NW,
Suite 4100, Washington, D.C. 20530, Tel.: (202) 598-2987, Fax: (202)
616-2441, E-mail: [email protected].
FOR PLAINTIFF STATE OF CALIFORNIA:
Xavier Becerra,
Attorney General.
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Emilio Varanini,
Deputy Attorney General, Office of the Attorney General of
California, 455 Golden Gate Avenue, Suite 11000, San Francisco,
California 94102, Phone: (415) 510-3541, Fax: (415) 703-5480, E-
mail: [email protected].
FOR PLAINTIFF STATE OF FLORIDA:
Pamela Jo Bondi,
Attorney General.
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Patricia A. Conners,
Deputy Attorney General.
Lizabeth A. Brady,
Chief, Multistate Enforcement.
Christopher R. Hunt,
Assistant Attorney General.
Rachel Michelle Steinman,
Assistant Attorney General, Office of the Attorney General of
Florida, PL-01, The Capitol, Tallahassee, FL 32399-1050, Phone:
(850) 414-3851, Fax: (850) 488-9134, [email protected].
FOR PLAINTIFF STATE OF HAWAII:
Russell Suzuki,
Attorney General.
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Rodney I. Kimura,
Deputy Attorney General, Office of the Attorney General of Hawaii,
425 Queen Street, Honolulu, HI 96813, Phone: (808) 586-1180, Fax:
(808) 586-1205, [email protected].
FOR PLAINTIFF STATE OF MISSISSIPPI:
Jim Hood,
Attorney General, State of Mississippi.
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Crystal Utley Secoy,
Consumer Protection Division, Mississippi Attorney General's Office,
P.O. Box 22947, Jackson, Mississippi 39225, Phone: (601) 359-4213,
[email protected].
FOR PLAINTIFF STATE OF WASHINGTON:
Robert W. Ferguson,
Attorney General.
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Luminita Nodit,
Assistant Attorney General, Attorney General's Office, 800 Fifth
Avenue, Suite 2000, Seattle, WA 98104-3188, Phone: (206) 254-0568,
Fax: (206) 464-6338, [email protected].
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
United States of America, et al.
Plaintiffs, v.
CVS Health Corporation,
and
AETNA Inc.
Defendants.
Case No. 1:18-cv-02340
Judge Richard J. Leon
PROPOSED FINAL JUDGMENT
WHEREAS, Plaintiffs United States of America and the States of
California, Florida, Hawaii, Mississippi, and Washington
(collectively, ``Plaintiff States''), filed their Complaint on
October 10, 2018;
AND WHEREAS, Plaintiffs and Defendants, CVS Health Corporation
(``CVS'') and Aetna Inc. (``Aetna''), have consented to the entry of
this Final Judgment without trial or adjudication of any issue of
fact or law and without this Final Judgment constituting any
evidence against or admission by any party regarding any issue of
fact or law;
AND WHEREAS, Defendants agree to be bound by the provisions of
this Final Judgment pending its approval by the Court;
AND WHEREAS, the essence of this Final Judgment is the prompt
and certain divestiture of certain rights and assets by Defendants
to assure that competition is not substantially lessened;
AND WHEREAS, Plaintiffs require Defendants to divest certain
assets for the purpose of remedying the loss of competition alleged
in the Complaint;
AND WHEREAS, Defendants have represented to Plaintiffs that the
divestiture required below can and will be made and that Defendants
will not raise claims of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions
contained below;
NOW THEREFORE, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ORDERED, ADJUDGED, AND DECREED:
I. JURISDICTION
The Court has jurisdiction over the subject matter of and each
of the parties to this action. The Complaint states a claim upon
which relief may be granted against Defendants under Section 7 of
the Clayton Act, 15 U.S.C. Sec. 18.
II. DEFINITIONS
As used in this Final Judgment:
A. ``Acquirer'' means WellCare or another entity approved by the
United States in its sole discretion to whom Defendants divest the
Divestiture Assets.
B. ``Aetna'' means Defendant Aetna Inc., a Pennsylvania
corporation with its headquarters in Hartford, Connecticut; its
successors and assigns; and its subsidiaries, divisions, groups,
affiliates (for purposes of this definition, CVS is not deemed an
affiliate of Aetna), partnerships, and joint ventures, and their
directors, officers, managers, agents, and employees.
C. ``Aetna Brands'' means Aetna's and Aetna's current
affiliates' names, marks, logos, colors, and copyrights, including,
``Aetna,'' ``Aetna Medicare,'' ``Aetna Medicare Rx,'' ``Aetna
Medicare Solutions,'' ``Aetna Coventry,'' ``Aetna Medicare Rx Value
Plus (PDP).''
D. ``Aetna's Individual PDP Business'' means Aetna's ongoing
business of offering PDP plans to individual Medicare beneficiaries
under CMS contracts S-5768 and S-5810.
E. ``Broker Contract'' means a valid contract with a third-party
to sell PDPs under CMS contracts S-5768 or S-5810.
F. ``CMS'' means the Centers for Medicare and Medicaid Services,
an agency within the U.S. Department of Health and Human Services.
G. ``CVS'' means Defendant CVS Health Corporation, a Delaware
corporation with its headquarters in Woonsocket, Rhode Island; its
successors and assigns; and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
[[Page 52562]]
H. ``Divestiture Assets'' means Aetna's Individual PDP Business,
including:
(1) all rights and obligations relating to Aetna's Individual
PDP Business, including the right to offer individual PDPs to
enrollees under CMS contracts S-5768 and S-5810 and the right to
receive from CMS a per member per month payment in exchange for
providing or arranging for the benefits offered under CMS contracts
S-5768 and S-5810; and
(2) copies of all books, records, and data, both current and
historical, relating to CMS contracts S-5768 and S-5810. Where
books, records, or data relate to the CMS contracts S-5768 or S-
5810, but not solely to these contracts, Defendants must provide all
excerpts relating to the S-5768 and S-5810 contracts.
I. ``PDP'' means a standalone prescription drug plan option
available to Medicare beneficiaries under Medicare Part D that
subsidizes the costs of prescription drugs for enrollees.
J. ``Relevant Personnel'' means every person providing pharmacy
network, product development, and actuarial support for Aetna's
Individual PDP Business.
K. ``WellCare'' means WellCare Health Plans, Inc., a Delaware
corporation with its headquarters in Tampa, Florida; its successors
and assigns; and its subsidiaries.
III. APPLICABILITY
A. This Final Judgment applies to each Defendant and all other
persons in active concert or participation with any Defendant who
receive actual notice of this Final Judgment by personal service or
otherwise.
B. If, before complying with Section IV and Section VI of this
Final Judgment, Defendants sell or otherwise dispose of all or
substantially all of their assets or of lesser business units that
include the Divestiture Assets, Defendants must require the
purchasers to be bound by the provisions of this Final Judgment.
Defendants need not obtain such an agreement from the Acquirer of
the assets divested under this Final Judgment.
IV. DIVESTITURE
A. Within 30 calendar days after the filing of the Complaint in
this matter, Defendants must divest the Divestiture Assets in a
manner consistent with this Final Judgment to an Acquirer acceptable
to the United States, in its sole discretion, after consultation
with the Plaintiff States. The United States in its sole discretion
may agree to one or more extensions of this time period not to
exceed 90 calendar days in total and must notify the Court in such
circumstances. Defendants must use their best efforts to divest the
Divestiture Assets as expeditiously as possible.
B. If Defendants attempt to divest the Divestiture Assets to an
Acquirer other than WellCare, Defendants must promptly make known,
by usual and customary means, the availability of the Divestiture
Assets. Defendants must inform any person making an inquiry
regarding a possible purchase of the Divestiture Assets that they
are being divested in accordance with this Final Judgment and
provide that person with a copy of this Final Judgment.
C. Defendants must obtain all regulatory approvals relating to
the Divestiture Assets as expeditiously as possible. If applications
for approval have been filed with the appropriate governmental units
within five calendar days after the United States has provided
written notice under Paragraph VII(C) that it does not object to a
proposed divestiture, but these required approvals have not been
issued or become effective before the end of the period permitted
for divestiture, the period for divestiture is extended until five
business days after all necessary government approvals have been
received. With respect to this Paragraph, an application for CMS
approval is deemed to have been filed when Defendants have given CMS
advance notice of a possible change in ownership under 42 C.F.R.
Sec. 423.551-552, as long as Defendants timely submit all materials
required by CMS for approval.
D. Defendants must permit the Acquirer to have reasonable access
to personnel and access to any and all financial, operational, or
other documents and information customarily provided as part of a
due diligence process.
E. Defendants may not take any action that will impede in any
way the permitting, operation, or divestiture of the Divestiture
Assets.
F. The divestiture under Section IV or VI of this Final Judgment
must include the entire Divestiture Assets unless the United States,
in its sole discretion, after consultation with the Plaintiff
States, otherwise consents in writing. The divestiture must be
accomplished in such a way as to satisfy the United States, in its
sole discretion, after consultation with the Plaintiff States, that
the Divestiture Assets can and will be used by the Acquirer as part
of a viable, ongoing individual PDP business. Defendants will divest
the Divestiture Assets in a manner that demonstrates, to the sole
satisfaction of the United States after consultation with the
Plaintiff States, that the Divestiture Assets will remain viable and
that the divestiture of such assets will remedy the competitive harm
alleged in the Complaint. The divestiture, whether under Section IV
or Section VI of this Final Judgment,
(1) must be made to an Acquirer that, in the United States' sole
judgment, after consultation with the Plaintiff States, has the
intent and capability (including the necessary managerial,
operational, technical, and financial capability) of competing
effectively in the business of selling individual PDPs; and
(2) must be accomplished so as to satisfy the United States, in
its sole discretion, after consultation with the Plaintiff States,
that none of the terms of any agreement between an Acquirer and
Defendants give Defendants the ability unreasonably to raise the
Acquirer's costs, to lower the Acquirer's efficiency, or otherwise
to interfere in the ability of the Acquirer to compete effectively.
G. Defendants must communicate and cooperate fully with the
Acquirer to work in good faith with CMS to implement a novation
process that is efficient and adheres to CMS's requirements. This
cooperation includes: (i) preparing and filing as promptly as
practicable with any governmental authority or other third party all
documentation to effect all necessary, proper or advisable filings;
(ii) obtaining as promptly as practicable and maintaining all
consents required to be obtained from any governmental authority or
other third party that are necessary, proper, or advisable to
consummate the transactions contemplated by this Final Judgment;
(iii) to the extent permitted by applicable law, furnishing as
promptly as practicable to one another or any governmental authority
any information or documentary materials reasonably requested or
required in connection with obtaining and maintaining such consents;
and (iv) communicating and cooperating with the other party and its
affiliates in connection with such matters.
H. At the option of the Acquirer, Defendants must execute an
administrative services agreement, and fully perform the duties and
obligations of that agreement until at least December 31, 2019. The
services to be provided by Defendants to the Acquirer under the
administrative services agreement must encompass all services
necessary to operate the Divestiture Assets, including: (1) pharmacy
network management and contracting; (2) prescription drug claims
processing and run-out of claims processing; (3) utilization review
and quality management; (4) data collection, reporting and
submission; (5) rebate management; (6) formulary administration; (7)
eligibility (including retro-eligibility) and enrollment; (8)
billing and invoicing; (9) prescription drug event file management
and submission; (10) medication therapy management services; (11)
disease management; (12) clinical safety and drug adherence
programs; (13) print and fulfillment services; (14) customer
service; (15) appeals and grievances; (16) coordination of benefits;
(17) record retention; (18) transition services; (19) run-out
services; (20) oversight compliance activities; (21) reporting
activities; (22) audit support activities; and (23) the provision of
actuarial bid data. The terms and conditions of such an agreement
must be acceptable to the United States in its sole discretion.
I. Defendants must grant the Acquirer a non-exclusive, royalty-
free license, under which the Acquirer is permitted to use the Aetna
Brands for the limited purposes of marketing of the Divestiture
Assets, transition to a future branded PDP, communications with
enrollees regarding benefits and coverage under the Divestiture
Assets, and other materials that are necessary for operation of the
Divestiture Assets through December 31, 2019, as permitted by CMS in
accordance with all laws and regulations.
J. During the 2020 plan year (January 1, 2020, through December
31, 2020), Defendants may not directly, or indirectly through an
affiliate, offer individual standalone Medicare Part D products
under the Aetna Brands.
K. Except in connection with marketing of the Divestiture Assets
for the 2019 plan year (January 1, 2019 through December 31, 2019),
Defendants may not use any PDP enrollee data relating to the
Divestiture Assets for Part D or Medicare Advantage marketing
purposes (including direct mail, email campaigns,
[[Page 52563]]
outbound Medicare Advantage cross-selling activities, and other
similar marketing and retention communications), nor may Defendants
instruct brokers to do so.
L. Defendants must assign to the Acquirer all current and valid
Broker Contracts (or a duplicate of those Contracts) concerning the
Divestiture Assets and must provide the Acquirer with contact
information (name, principal address, key contact, email address,
and telephone number) and the terms of PDP-related compensation for
each such broker.
M. During the 90-day period following the closing of the sale of
the Divestiture Assets, Defendants must use reasonable best efforts
to obtain written consent from retail pharmacy entities with 20 or
more locations and pharmacy services administrative organizations to
disclose to the Acquirer the rates relating to the Divestiture
Assets by basic and enhanced benefit plan, and by PDP contract,
including: (1) for the 2019 benefit year, the generic rate, the
generic guarantee, the brand rate, the brand guarantee, dispensing
fees, any price concessions or direct and indirect remuneration, and
any conditions or limitations agreed to in order to achieve these
reimbursement rates; and (2) for the 2018 benefit year, any price
concessions or direct and indirect remuneration. Defendants must
provide the Acquirer with periodic updates and information regarding
its efforts to obtain consent from such entities. If the entities
provide such consent after the 90-day period has expired, but before
January 1, 2020, Defendants are still obligated to disclose the
reimbursement rates to the Acquirer. Within 30 days of the closing
of the sale of the Divestiture Assets, Defendants must provide
aggregate average reimbursement rates by class of trade (national
chains, mass merchandisers, grocers, and pharmacy services
administrative organizations) and by basic and enhanced benefit plan
under the PDP contracts.
N. Defendants must use all reasonable efforts to maintain and
increase the sales and revenues of the Divestiture Assets, and must
maintain at 2018 or previously approved levels for 2019, whichever
are higher, all promotional, advertising, sales, technical
assistance, marketing, and merchandising support for the Divestiture
Assets.
V. EMPLOYEES
A. No later than 10 business days following the filing of the
Complaint in this matter, Defendants must provide to the Acquirer,
the United States, and the Plaintiff States organization charts
covering all Relevant Personnel.
B. Unless the United States otherwise consents in writing after
consultation with the Plaintiff States, upon request of the
Acquirer, Defendants must make Relevant Personnel available for
interviews with the Acquirer during normal business hours at a
mutually agreeable location. Defendants may not interfere with any
negotiations by the Acquirer to employ any Relevant Personnel.
Interference includes but is not limited to offering to increase the
salary or benefits of Relevant Personnel other than as part of an
increase in salary or benefits granted in the ordinary course of
business as part of the annual compensation cycle.
C. For any Relevant Personnel who elect employment with the
Acquirer during the recruitment period agreed upon by Acquirer and
Defendants, Defendants must waive all non-compete and non-disclosure
agreements (except as noted in Paragraph V(E)); vest all unvested
pension benefits; vest pro-rata any equity rights that do not vest
on an installment basis; vest pro-rata any equity rights that would
vest on an installment basis for 2018 or 2019, with the pro-rata
basis for installment-based equity rights being the number of days
the employee was employed by Defendants in the year that the
installment would vest; and provide all benefits that Relevant
Personnel would be provided if transferred to a buyer of an ongoing
business.
D. For a period of one year from the date of filing of the
Complaint in this matter, Defendants may not solicit to hire, or
hire, any Relevant Personnel who was hired by the Acquirer, unless
(a) the individual is terminated or laid off by the Acquirer or (b)
the Acquirer agrees in writing that Defendants may solicit or hire
that individual.
E. Nothing in Section V prohibits Defendants from maintaining
any reasonable restrictions on the disclosure by any employee who
accepts an offer of employment with the Acquirer of Defendants'
proprietary non-public information that is (a) not otherwise
required to be disclosed by this Final Judgment, (b) related solely
to Defendants' businesses and clients, and (c) involving a business
other than the Divestiture Assets.
F. The Acquirer's right to hire personnel under Section V lasts
for a period of 60 days after the divestiture closing date.
VI. APPOINTMENT OF DIVESTITURE TRUSTEE
A. If Defendants have not divested the Divestiture Assets within
the time period specified in Paragraph IV(A), Defendants must notify
the United States and the Plaintiff States of that fact in writing.
Upon application of the United States, the Court will appoint a
Divestiture Trustee selected by the United States and approved by
the Court to effect the divestiture of the Divestiture Assets.
B. After the appointment of a Divestiture Trustee becomes
effective, only the Divestiture Trustee has the right to sell the
Divestiture Assets. The Divestiture Trustee will have the power and
authority to accomplish the divestiture to an Acquirer acceptable to
the United States, in its sole discretion, after consultation with
the Plaintiff States, at such price and on such terms as are then
obtainable upon reasonable effort by the Divestiture Trustee,
subject to the provisions of Sections IV, V, VI, and VII of this
Final Judgment, and will have any other powers that the Court deems
appropriate. Subject to Paragraph VI(D) of this Final Judgment, the
Divestiture Trustee may hire at the cost and expense of Defendants
any agents, investment bankers, attorneys, accountants, or
consultants, who will be solely accountable to the Divestiture
Trustee, reasonably necessary in the Divestiture Trustee's judgment
to assist in the divestiture. Any such agents or consultants will
serve on such terms and conditions as the United States approves,
including confidentiality requirements and conflict of interest
certifications.
C. Defendants will not object to a sale by the Divestiture
Trustee on any ground other than the Divestiture Trustee's
malfeasance. Any such objection by Defendants must be conveyed in
writing to the United States and the Divestiture Trustee within 10
calendar days after the Divestiture Trustee has provided the notice
required under Paragraph VI(A).
D. The Divestiture Trustee will serve at the cost and expense of
Defendants under a written agreement, on such terms and conditions
as the United States approves, including confidentiality
requirements and conflict of interest certifications. The
Divestiture Trustee will account for all monies derived from the
sale of the assets sold by the Divestiture Trustee and all costs and
expenses so incurred. After approval by the Court of the Divestiture
Trustee's accounting, including fees for any of its services yet
unpaid and those of any professionals and agents retained by the
Divestiture Trustee, all remaining money will be paid to Defendants
and the trust will then be terminated. The compensation of the
Divestiture Trustee and any professionals and agents retained by the
Divestiture Trustee will be reasonable in light of the value of the
Divestiture Assets and based on a fee arrangement that provides the
Divestiture Trustee with incentives based on the price and terms of
the divestiture and the speed with which it is accomplished, but the
timeliness of the divestiture is paramount. If the Divestiture
Trustee and Defendants are unable to reach agreement on the
Divestiture Trustee's or any agents' or consultants' compensation or
other terms and conditions of engagement within 14 calendar days of
the appointment of the Divestiture Trustee, the United States may,
in its sole discretion, take appropriate action, including making a
recommendation to the Court. The Divestiture Trustee will, within
three business days of hiring any other agents or consultants,
provide written notice of such hiring and the rate of compensation
to Defendants and the United States.
E. Defendants must use their best efforts to assist the
Divestiture Trustee in accomplishing the required divestiture. The
Divestiture Trustee and any agents or consultants retained by the
Divestiture Trustee will have full and complete access to the
personnel, books, records, and facilities of the business to be
divested, and Defendants must provide or develop financial and other
information relevant to such business as the Divestiture Trustee may
reasonably request, subject to reasonable protection for trade
secrets; other confidential research, development, or commercial
information; or any applicable privileges. Defendants may not take
any action to interfere with or to impede the Divestiture Trustee's
accomplishment of the divestiture.
F. After its appointment, the Divestiture Trustee will file
monthly reports with the United States and, as appropriate, the
Court, setting forth the Divestiture Trustee's efforts
[[Page 52564]]
to accomplish the divestiture ordered under this Final Judgment. To
the extent such reports contain information that the Divestiture
Trustee deems confidential, such reports will not be filed in the
public docket of the Court. Such reports will include the name,
address, and telephone number of each person who, during the
preceding month, made an offer to acquire, expressed an interest in
acquiring, entered into negotiations to acquire, or was contacted or
made an inquiry about acquiring any interest in the Divestiture
Assets and will describe in detail each contact with any such
person. The Divestiture Trustee will maintain full records of all
efforts made to divest the Divestiture Assets.
G. If the Divestiture Trustee has not accomplished the
divestiture ordered under this Final Judgment within six months
after its appointment, the Divestiture Trustee will promptly file
with the Court a report setting forth (1) the Divestiture Trustee's
efforts to accomplish the required divestiture; (2) the reasons, in
the Divestiture Trustee's judgment, why the required divestiture has
not been accomplished; and (3) the Divestiture Trustee's
recommendations. To the extent such report(s) contain information
that the Divestiture Trustee deems confidential, such report(s) will
not be filed in the public docket of the Court. The Divestiture
Trustee will at the same time furnish such report to the United
States, which will have the right to make additional recommendations
consistent with the purpose of the trust. The Court thereafter will
enter such orders as it deems appropriate to carry out the purpose
of the Final Judgment, which may, if necessary, include extending
the trust and the term of the Divestiture Trustee's appointment by a
period requested by the United States.
H. If the United States determines that the Divestiture Trustee
has ceased to act or failed to act diligently or in a reasonably
cost-effective manner, the United States may recommend the Court
appoint a substitute Divestiture Trustee.
VII. NOTICE OF PROPOSED DIVESTITURE
A. Within two business days following execution of a definitive
divestiture agreement, Defendants or the Divestiture Trustee,
whichever is then responsible for effecting the divestiture required
herein, must notify the United States and the Plaintiff States of
any proposed divestiture required by Section IV or Section VI of
this Final Judgment. If the Divestiture Trustee is responsible, the
Divestiture Trustee must similarly notify Defendants. The notice
must set forth the details of the proposed divestiture and list the
name, address, and telephone number of each person not previously
identified who offered or expressed an interest in or desire to
acquire any ownership interest in the Divestiture Assets, together
with full details of the same.
B. Within 15 calendar days of receipt by the United States of
such notice, the United States, in its sole discretion, after
consultation with the Plaintiff States, may request from Defendants,
the Acquirer, any other third party, or the Divestiture Trustee, if
applicable, additional information concerning the proposed
divestiture and the Acquirer. Defendants and the Divestiture Trustee
must furnish any additional information requested within 15 calendar
days of the receipt of the request, unless the parties otherwise
agree.
C. Within 30 calendar days after receipt of the notice or within
20 calendar days after the United States has been provided the
additional information requested from Defendants, the Acquirer, any
third party, and the Divestiture Trustee, whichever is later, the
United States will provide written notice to Defendants and the
Divestiture Trustee, if there is one, stating whether or not it
objects to the proposed divestiture. If the United States provides
written notice that it does not object, the divestiture may be
consummated, subject only to Defendants' limited right to object to
the sale under Paragraph VI(C) of this Final Judgment. Absent
written notice that the United States does not object to the
proposed Acquirer or upon objection by the United States, a
divestiture proposed under Section IV or Section VI may not be
consummated. Upon objection by Defendants under Paragraph VI(C), a
divestiture proposed under Section VI must not be consummated unless
approved by the Court.
VIII. FINANCING
Defendants may not finance all or any part of any purchase made
under Section IV or Section VI of this Final Judgment.
IX. ASSET PRESERVATION
Until the divestiture required by this Final Judgment has been
accomplished, Defendants must take all steps necessary to comply
with the Asset Preservation Stipulation and Order entered by the
Court. Defendants may not take any action that would jeopardize the
divestiture ordered by the Court.
X. AFFIDAVITS
A. Within 20 calendar days of the filing of the Complaint in
this matter, and every 30 calendar days thereafter until the
divestiture has been completed under Section IV or Section VI,
Defendants must deliver to the United States and the Plaintiff
States an affidavit, signed by each Defendant's chief financial
officer and general counsel, which describes the fact and manner of
Defendants' compliance with Section IV or Section VI of this Final
Judgment. Each affidavit must include the name, address, and
telephone number of each person who, during the preceding 30
calendar days, made an offer to acquire, expressed an interest in
acquiring, entered into negotiations to acquire, or was contacted or
made an inquiry about acquiring, any interest in the Divestiture
Assets, and must describe in detail each contact with any such
person during that period. Each affidavit must also include a
description of Defendants' efforts to solicit buyers for the
Divestiture Assets, and to provide required information to
prospective Acquirers, including the limitations, if any, on such
information. Assuming the information set forth in the affidavit is
true and complete, any objection by the United States, in its sole
discretion, after consultation with the Plaintiff States, to
information provided by Defendants, including limitation on
information, must be made within 14 calendar days of receipt of such
affidavit.
B. Within 20 calendar days of the filing of the Complaint in
this matter, Defendants must deliver to the United States and the
Plaintiff States an affidavit that describes in reasonable detail
all actions Defendants have taken and all steps Defendants have
implemented on an ongoing basis to comply with Section IX of this
Final Judgment. Defendants must deliver to the United States and the
Plaintiff States an affidavit describing any changes to the efforts
and actions outlined in Defendants' earlier affidavits filed under
this Section within 15 calendar days after the change is
implemented.
C. Defendants must keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after the
divestiture has been completed.
XI. APPOINTMENT OF MONITORING TRUSTEE
A. Upon application of the United States, the Court will appoint
a Monitoring Trustee selected by the United States, after
consultation with the Plaintiff States, and approved by the Court.
B. The Monitoring Trustee will have the power and authority to
monitor Defendants' compliance with the terms of this Final Judgment
and the Asset Preservation Stipulation and Order entered by the
Court and will have any other powers that the Court deems
appropriate. The Monitoring Trustee must investigate and report on
the Defendants' compliance with this Final Judgment and the Asset
Preservation Stipulation and Order, and Defendants' progress toward
effectuating the purposes of this Final Judgment, including the
implementation and execution of the agreements contemplated in
Paragraphs IV(G)-(H) and the hiring of employees under Section V.
C. Subject to Paragraph XI(E) of this Final Judgment, the
Monitoring Trustee may hire at the cost and expense of Defendants
any agents, investment bankers, attorneys, accountants, or
consultants, who will be solely accountable to the Monitoring
Trustee, reasonably necessary in the Monitoring Trustee's judgment.
These agents, investment bankers, attorneys, accountants, or
consultants will serve on terms and conditions approved by the
United States, including confidentiality requirements and conflict-
of-interest certifications.
D. Defendants may not object to actions taken by the Monitoring
Trustee in fulfillment of the Monitoring Trustee's responsibilities
under any Order of the Court on any ground other than the Monitoring
Trustee's malfeasance. Any such objection by Defendants must be
conveyed in writing to the United States and the Monitoring Trustee
within 10 calendar days after the action taken by the Monitoring
Trustee giving rise to Defendants' objection.
E. The Monitoring Trustee will serve at the cost and expense of
Defendants, under a written agreement with Defendants and on such
terms and conditions as the United States approves, including
confidentiality
[[Page 52565]]
requirements and conflict of interest certifications. The
compensation of the Monitoring Trustee and any agents or consultants
retained by the Monitoring Trustee will be on reasonable and
customary terms commensurate with the individuals' experience and
responsibilities. If the Monitoring Trustee and Defendants are
unable to reach agreement on the Monitoring Trustee's or any agents'
or consultants' compensation or other terms and conditions of
engagement within 14 calendar days of the appointment of the
Monitoring Trustee, the United States may, in its sole discretion,
take appropriate action, including making a recommendation to the
Court. The Monitoring Trustee will, within three (3) business days
of hiring any agents or consultants, provide written notice of such
hiring and the rate of compensation to Defendants and the United
States.
F. The Monitoring Trustee will have no responsibility or
obligation for the operation of Defendants' businesses.
G. Defendants will use their best efforts to assist the
Monitoring Trustee in monitoring Defendants' compliance with their
individual obligations under this Final Judgment and under the Asset
Preservation Stipulation and Order. The Monitoring Trustee and any
agents or consultants retained by the Monitoring Trustee will have
full and complete access to the personnel, books, records, and
facilities relating to compliance with this Final Judgment, subject
to reasonable protection for trade secrets; other confidential
research, development, or commercial information; or any applicable
privileges. Defendants may not take any action to interfere with or
to impede the Monitoring Trustee's accomplishment of its
responsibilities.
H. After its appointment, the Monitoring Trustee must file
reports every 90 days, or more frequently as needed, with the United
States, the Plaintiff States, and, as appropriate, the Court setting
forth Defendants' efforts to comply with Defendants' obligations
under this Final Judgment and under the Asset Preservation
Stipulation and Order. To the extent these reports contain
information that the Monitoring Trustee deems confidential, the
reports may not be filed in the public docket of the Court.
I. At the discretion of the United States, the Monitoring
Trustee may serve until the expiration of the administrative
services agreement described in Paragraph IV(H), or January 1, 2020,
whichever is later.
J. If the United States determines that the Monitoring Trustee
has ceased to act or failed to act diligently or in a reasonably
cost-effective manner, it may recommend the Court appoint a
substitute Monitoring Trustee.
XII. COMPLIANCE INSPECTION
A. For the purposes of determining or securing compliance with
this Final Judgment, or of any related orders such as any Asset
Preservation Stipulation and Order, or of determining whether the
Final Judgment should be modified or vacated, and subject to any
legally recognized privilege, from time to time authorized
representatives of the United States, including agents and
consultants retained by the United States, must, upon written
request of an authorized representative of the Assistant Attorney
General in charge of the Antitrust Division and on reasonable notice
to Defendants, be permitted:
(1) access during Defendants' office hours to inspect and copy
or, at the option of the United States, to require Defendants to
provide electronic copies of all books, ledgers, accounts, records,
data, and documents in the possession, custody, or control of
Defendants relating to any matters contained in this Final Judgment;
and
(2) to interview, either informally or on the record,
Defendants' officers, employees, or agents, who may have their
individual counsel present, regarding such matters. The interviews
are subject to the reasonable convenience of the interviewee and
without restraint or interference by Defendants.
B. Upon the written request of an authorized representative of
the Assistant Attorney General in charge of the Antitrust Division,
Defendants must submit written reports or responses to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
Section XII may be divulged by the United States to any person other
than an authorized representative of the executive branch of the
United States, except in the course of legal proceedings to which
the United States is a party (including grand jury proceedings), for
the purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If, when Defendants furnish information or documents to the
United States, Defendants represent and identify in writing the
material in any such information or documents to which a claim of
protection may be asserted under Rule 26(c)(1)(G) of the Federal
Rules of Civil Procedure, and Defendants mark each pertinent page of
such material, ``Subject to claim of protection under Rule
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the
United States must give Defendants 10 calendar days' notice before
divulging such material in any legal proceeding (other than a grand
jury proceeding).
XIII. NO REACQUISITION OR RECOMBINATION OF DIVESTITURE ASSETS
Defendants may not reacquire any part of the Divestiture Assets
during the term of this Final Judgment. The Acquirer may not
purchase or otherwise obtain from Defendants during the term of this
Final Judgment any assets or businesses that compete with the
Divestiture Assets.
XIV. RETENTION OF JURISDICTION
The Court retains jurisdiction to enable any party to this Final
Judgment to apply to the Court at any time for further orders and
directions as may be necessary or appropriate to carry out or
construe this Final Judgment, to modify any of its provisions, to
enforce compliance, and to punish violations of its provisions.
XV. ENFORCEMENT OF FINAL JUDGMENT
A. The United States retains and reserves all rights to enforce
the provisions of this Final Judgment, including the right to seek
an order of contempt from the Court. Defendants agree that in any
civil contempt action, any motion to show cause, or any similar
action brought by the United States regarding an alleged violation
of this Final Judgment, the United States may establish a violation
of the decree and the appropriateness of any remedy therefor by a
preponderance of the evidence, and Defendants waive any argument
that a different standard of proof should apply.
B. The Final Judgment should be interpreted to give full effect
to the procompetitive purposes of the antitrust laws and to restore
all competition harmed by the challenged conduct. Defendants agree
that they may be held in contempt of, and that the Court may
enforce, any provision of this Final Judgment that, as interpreted
by the Court in light of these procompetitive principles and
applying ordinary tools of interpretation, is stated specifically
and in reasonable detail, whether or not it is clear and unambiguous
on its face. In any such interpretation, the terms of this Final
Judgment should not be construed against either party as the
drafter.
C. In any enforcement proceeding in which the Court finds that
Defendants have violated this Final Judgment, the United States may
apply to the Court for a one-time extension of this Final Judgment,
together with such other relief as may be appropriate. In connection
with any successful effort by the United States to enforce this
Final Judgment against a Defendant, whether litigated or resolved
before litigation, that Defendant agrees to reimburse the United
States for the fees and expenses of its attorneys, as well as any
other costs including experts' fees, incurred in connection with
that enforcement effort, including in the investigation of the
potential violation.
XVI. EXPIRATION OF FINAL JUDGMENT
Unless the Court grants an extension, this Final Judgment
expires 10 years from the date of its entry, except that after five
years from the date of its entry, this Final Judgment may be
terminated upon notice by the United States to the Court and
Defendants that the divestiture has been completed and that the
continuation of the Final Judgment no longer is necessary or in the
public interest.
XVII. PUBLIC INTEREST DETERMINATION
Entry of this Final Judgment is in the public interest. The
parties have complied with the requirements of the Antitrust
Procedures and Penalties Act, 15 U.S.C. Sec. 16, including making
copies available to the public of this Final Judgment, the
Competitive Impact Statement, any comments thereon, and the United
States' responses to comments. Based upon the record before the
Court, which includes the Competitive Impact Statement and any
comments and responses to comments filed with the Court, entry of
this Final Judgment is in the public interest.
Date: ____
[[Page 52566]]
[Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16]
-----------------------------------------------------------------------
United States District Judge
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
United States of America, et al. Plaintiffs, v. CVS Health
Corporation, and AETNA Inc. Defendants.
Case No. 1:18-cv-02340
Judge Richard J. Leon
COMPETITIVE IMPACT STATEMENT
Plaintiff United States of America files this Competitive Impact
Statement under Section 2(b) of the Antitrust Procedures and
Penalties Act (``APPA'' or ``Tunney Act''), 15 U.S.C. Sec. 16(b),
relating to the proposed Final Judgment submitted for entry in this
civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
On December 3, 2017, CVS Health Corporation agreed to acquire
Aetna Inc. for approximately $69 billion. The United States filed a
civil antitrust Complaint on October 10, 2018, seeking to enjoin the
proposed acquisition. The Complaint alleges that the likely effect
of this acquisition would be to lessen competition substantially for
the sale of standalone individual Medicare Part D prescription drug
plans (``individual PDPs''), resulting in increased premiums and
increased out-of-pocket costs paid by Medicare beneficiaries, higher
subsidies paid by the federal government (and ultimately,
taxpayers), and a lessening of service quality and innovation, all
in violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
At the same time that it filed the Complaint, the United States
also filed a proposed Final Judgment and Asset Preservation
Stipulation and Order, which are designed to prevent the merger's
likely anticompetitive effects. Under the proposed Final Judgment,
which is explained more fully below, Defendants are required to
divest Aetna's individual PDP business. Until the divestiture is
complete, the Asset Preservation Order requires Defendants to take
certain steps to ensure that, while the required divestitures are
pending, all of the divestiture assets will be preserved.
The United States and Defendants have stipulated that the
proposed Final Judgment may be entered after compliance with the
APPA. Entry of the proposed Final Judgment would terminate this
action, except that the Court would retain jurisdiction to construe,
modify, or enforce the provisions of the proposed Final Judgment and
to punish violations thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. Defendants and the Proposed Transaction
CVS, based in Woonsocket, Rhode Island, is involved in numerous
areas of the healthcare delivery chain. CVS operates the nation's
largest retail pharmacy chain; owns Caremark, a large pharmacy
benefit manager, which, among other things, connects health plans or
employers to pharmacies and drug manufacturers in the pharmacy
services supply chain; and sells Medicare Part D prescription drug
plans to individuals and groups under the brand name SilverScript.
SilverScript plans are available in all 50 states and the District
of Columbia, and have the second-largest enrollment in individual
PDPs nationwide. CVS's overall 2017 revenues were approximately $185
billion.
Aetna is based in Hartford, Connecticut, and is the nation's
third-largest health insurance company, providing commercial health
insurance; plans under the Medicare Advantage, Medicare Supplement,
and Medicaid programs; Medicare Part D prescription drug plans; and
pharmacy benefit management services. Like CVS, Aetna offers
individual PDPs in all 50 states and the District of Columbia. Aetna
is the fourth-largest provider of individual PDPs nationwide.
Aetna's 2017 revenues were approximately $60 billion.
On December 3, 2017, CVS agreed to acquire Aetna for
approximately $69 billion. This acquisition is the subject of the
Complaint and proposed Final Judgment filed by the United States on
October 10, 2018. The proposed transaction would lessen competition
substantially in markets for the sale of individual PDPs. In
recognition of the significant competitive concerns raised by the
proposed merger, Defendants have agreed to divest Aetna's individual
PDP business.
B. The Competitive Effects of the Transaction on Individual PDP
Markets
1. Relevant Markets
As alleged in the Complaint, individual PDPs are a relevant
product market under Section 7 of the Clayton Act. For the vast
majority of Medicare beneficiaries, prescription drug coverage is
determined by how they obtain medical coverage: beneficiaries who
have chosen Original Medicare can enroll in an individual PDP, and
beneficiaries enrolled in Medicare Advantage, a private insurance
option that replaces Original Medicare, can enroll in a plan that
includes drug coverage.
Once beneficiaries have chosen between Original Medicare and
Medicare Advantage, they are very unlikely to switch between the two
programs. See United States v. Aetna, 240 F. Supp. 3d 1, 27-29
(D.D.C. 2017). As the Complaint alleges, only about two percent of
individual PDP members convert to Medicare Advantage plans each year
during open enrollment, and an even smaller percentage of
individuals convert from Medicare Advantage plans to individual
PDPs. As a result, a hypothetical monopolist of individual PDPs
could profitably raise prices by a small but significant amount on
individual PDPs without risking loss of substantial membership to
Medicare Advantage plans.
The Complaint alleges that the relevant geographic markets under
Section 7 of the Clayton Act for individual PDPs are Medicare Part D
regions. The Centers for Medicare & Medicaid Services (``CMS''), a
component of the Department of Health and Human Services, has
divided the country into 34 Part D regions, none of which is smaller
than a single state. CMS requires the companies that sell individual
PDPs, also known as Part D plan sponsors, to offer the same plans at
the same price across the entire Part D region. Individuals can only
purchase PDPs that are offered in the region where they reside.
Thus, a prospective purchaser of an individual PDP would be unable
to turn to plan sponsors outside of the Part D region in response to
a price increase.
2. Competitive Effects
Competition is an essential element of individual PDP markets.
Congress designed the Medicare Part D program to rely on competition
among multiple private plan sponsors to keep annual bids--which form
the basis for federal government subsidies and beneficiary
premiums--low.
The proposed merger is likely to cause a significant increase in
concentration and result in highly concentrated markets in 12 of the
regions identified in the Complaint: Arkansas, California, Florida,
Georgia, Hawaii, Kansas, Louisiana, Mississippi, Missouri, New
Mexico, Ohio, and South Carolina. In each of these regions, the
merger would eliminate significant head-to-head competition between
CVS and Aetna. As alleged in the Complaint, CVS's and Aetna's
individual PDPs are among the fastest growing plans in the country,
and competition between them has led not only to lower premiums and
out-of-pocket expenses but also improved drug formularies (lists of
drugs that govern an enrollee's coverage and required copayments),
more attractive pharmacy networks, enhanced benefits, and innovative
product features. Following the proposed transaction, the merged
firm would control at least 35% of the individual PDP market in each
region, with a high of 53.5% in Hawaii. In each of these regions,
the combination of CVS and Aetna would surpass the thresholds
necessary to establish a presumption of enhanced market power and a
substantial lessening of competition. See United States v. Anthem,
Inc., 855 F.3d 345, 349 (D.C. Cir. 2017) (holding that market
concentration can establish a presumption of anticompetitive
effects).
In addition, in five of the Part D regions discussed above
(Arkansas, Georgia, Kansas, Mississippi, and Missouri), as well as
four additional regions (North Carolina, Oklahoma, Wisconsin, and
the multistate region of Iowa, Minnesota, Montana, Nebraska, North
Dakota, South Dakota, and Wyoming), the merged company will account
for between 35% and 55% of all low-income-subsidy-eligible
beneficiaries, including those who enroll in Medicare Advantage
plans with prescription drug benefits. When combined with other
market factors, these increases in the share of low-income subsidy
beneficiaries suggests that the merger would likely result in
further loss of competition.
Specifically, the merger would likely increase the merged
company's ability to influence a critical feature of the Medicare
Part D program called the low-income subsidy (``LIS'') benchmark,
which in turn would increase premiums and out-of-pocket expenses for
basic individual PDPs--those plans that provide an equivalent to the
minimum coverage set forth in 42 U.S.C. Sec. 1395w-102 and in which
LIS beneficiaries can enroll (or be auto-enrolled) for free. As
explained in the Complaint, plan sponsors
[[Page 52567]]
submit bids for their basic plans each year, and CMS calculates a
region-by-region, LIS enrollment-weighted average of these bids to
determine the low-income benchmark and low-income subsidy. When bids
are higher, the low-income subsidy--paid by the federal government--
is higher, as are the premiums paid by those who do not receive a
low-income subsidy.
The LIS benchmark also, as a practical matter, encourages plan
sponsors to offer lower bids. If plan sponsor bids above the low-
income benchmark, it risks not only losing thousands of new
enrollees but also risks having CMS transfer tens or even hundreds
of thousands of current enrollees to a below-benchmark competitor.
The uncertainty and risk associated with missing the low-income
benchmark, especially by more than a de minimis amount, contribute
to keeping bids low.
3. Entry and Expansion
Neither entry nor expansion is likely to solve the competitive
problems created by the merger between CVS and Aetna. Recent
entrants into individual PDP markets have been largely unsuccessful,
with many subsequently exiting the market or shrinking their
geographic footprint. Effective entry into the sale of individual
PDPs requires years of planning, millions of dollars, access to
qualified personnel, and competitive contracts with retail
pharmacies and pharmaceutical manufacturers, and companies must
establish sufficient scale quickly to keep their plans' costs down.
Because of these barriers to entry, entry or expansion into the sale
of individual PDPs is unlikely to be timely or sufficient to remedy
the anticompetitive effects from this merger.
III. Explanation of the Proposed Final Judgment
The divestiture mandated by the proposed Final Judgment will
resolve the United States' concerns about the likely anticompetitive
effects of the acquisition by requiring CVS to divest Aetna's
individual PDP business nationwide. To ensure that the acquirer of
Aetna's business will replace Aetna as an effective competitor and
innovator in each of the 16 markets in which the Complaint alleges
that the proposed merger would harm competition, the United States
carefully scrutinized Defendants' businesses to identify a
comprehensive package of assets for divestiture.
A. Scope of the Divestiture
In evaluating a remedy, the United States' fundamental goal is
to preserve competition. See United States v. E.I. du Pont de
Nemours & Co., 366 U.S. 316, 324 (1961) (``The key to the whole
question of an antitrust remedy is of course the discovery of
measures effective to restore competition.''). This goal is most
directly accomplished through a divestiture of the overlapping
products. Because the goal of a divestiture is to create a viable
entity that will effectively preserve competition, in certain cases,
the divestiture must include assets that are beyond the affected
relevant market.
Guided by these principles, the United States identified a
divestiture package that remedies the various dimensions of harm
threatened by the proposed merger:
First, the proposed Final Judgment requires CVS to divest
both of Aetna's individual PDP contracts with CMS, which is the
portion of Aetna's business that vigorously competes head-to-head
with CVS today. Divestiture of Aetna's nationwide individual PDP
business--and not just Aetna's business in the regions identified in
the Complaint--will provide the acquirer with the scale and ability
to implement a national strategy comparable to Aetna's current
strategy. That is because contracts with pharmacy benefit managers,
retail pharmacy networks, and pharmaceutical companies are almost
all negotiated on a national basis, with the number of Medicare
beneficiaries covered by the plan sponsor being a key factor in the
rates that the plan sponsor receives. Thus, a national divestiture
helps provide the acquirer with the ability to replicate Aetna's
cost structure and approach to the market.
Defendants are also required to transfer data relating to
Aetna's individual PDP business, information regarding the amount
that Aetna pays to retail pharmacies in exchange for filling
prescriptions for Aetna members, and any contracts with brokers that
currently sell Aetna's individual PDPs, including information
regarding how much Aetna currently pays these brokers. The transfer
of this data and information will help ensure that the acquirer has
sufficient knowledge and supporting information that it can use to
negotiate comparable retail-pharmacy rates and contracts with
brokers moving forward.
The divestiture buyer also will have the opportunity to
interview and hire Aetna's current employees with expertise related
to the individual PDP business, and Defendants have agreed to waive
any non-compete, confidentiality, or non-disclosure employment
provisions that would otherwise prevent these employees from
accepting positions with the individual PDP business of the
acquirer. These employees and their knowledge of drug-manufacturer
rebates (volume-based discounts on the price of brand name drugs)
will provide the acquirer with the option of continuing Aetna's
approach to the market.
Taken together, these assets constitute the entirety of Aetna's
individual PDP business and will provide the acquirer with a similar
ability and incentive to compete as Aetna has today.
Because the divested assets will be separated from Aetna and
incorporated into the acquirer's business, the proposed Final
Judgment includes provisions to foster the seamless and efficient
transition of the assets. At the acquirer's option, Defendants are
required to enter into an administrative services agreement to
provide the acquirer all services required to manage the divestiture
assets through the remainder of the 2018 plan year and through the
2019 plan year, which ends on December 31, 2019. This provision of
the proposed Final Judgment provides continuity to members who
purchase an Aetna individual PDP during the open-enrollment period
running from October through December 2018. Because CMS has already
reviewed and approved Aetna's proposed 2019 plans, requiring Aetna
to continue to provide the requisite support and services for these
plans will ensure that members receive the products that they have
chosen. Among other things, the proposed Final Judgment allows the
acquirer to rely on Aetna to assemble and contract with pharmacy
networks, administer the plans' formularies, and provide back-office
support and claims administration functions in 2019. Additionally,
CVS and Aetna must allow the acquirer to use the Aetna brand for the
divestiture assets through at least December 31, 2019, and CVS and
Aetna are prohibited, through 2020, from using the Aetna brand for
the CVS individual PDP business that they are retaining. This will
provide the acquirer with a window to establish a relationship with
current Aetna individual PDP beneficiaries which will help avoid
consumer confusion.
B. The Divestiture Process
The proposed Final Judgment requires CVS and Aetna, within 30
days of the filing of the Complaint, to divest, as a viable ongoing
business, Aetna's individual PDP business. The proposed Final
Judgment also requires CVS and Aetna expeditiously to obtain all
regulatory approvals necessary to complete the divestiture,
specifying that they must apply for these approvals within five
calendar days of the United States' approval of a divestiture buyer.
CVS and Aetna have already entered into an agreement to sell the
divestiture assets to WellCare, a health insurance company, and the
United States has determined that WellCare is a suitable buyer for
the divestiture assets. WellCare already has experience providing
individual PDPs throughout the United States. The divestiture
assets, when combined with WellCare's existing business, will allow
WellCare to become more competitive for both low-income subsidy and
non-low-income subsidy Medicare beneficiaries by providing WellCare
with increased scale and the opportunity to incorporate and build
upon Aetna's existing strategy by hiring current Aetna employees.
Should the sale of the divestiture assets to WellCare not be
completed, the assets must be divested in a way that satisfies the
United States in its sole discretion that the assets can and will be
operated by another company as a viable, ongoing business that can
compete effectively in the relevant markets. CVS and Aetna must take
all reasonable steps necessary to accomplish the divestiture quickly
and to cooperate with prospective buyers.
If Defendants do not accomplish the divestiture within the 30
days prescribed in the proposed Final Judgment, the proposed Final
Judgment provides that the Court will appoint a Divestiture Trustee,
selected by the United States and paid for by CVS and Aetna, to
effect the divestiture. After the Divestiture Trustee is appointed,
the Trustee will file monthly reports with the United States and, as
appropriate, the Court, setting forth his or her efforts to
accomplish the divestiture. At
[[Page 52568]]
the end of six months, if the divestiture has not been accomplished,
the Divestiture Trustee and the United States will make
recommendations to the Court, which will enter such orders as
appropriate under the circumstances.
C. Provisions to Ensure Compliance
To ensure a smooth transition process for the divestiture
assets, particularly during the temporary period when they will be
managed by CVS, the proposed Final Judgment provides that the United
States may appoint a Monitoring Trustee with the power and authority
to investigate and report on Defendants' compliance with the terms
of the Final Judgment and the Asset Preservation Stipulation and
Order during the pendency of the divestiture. The Monitoring Trustee
would not have any responsibility or obligation for the operation of
Defendants' businesses. The Monitoring Trustee would serve at
Defendants' expense, on such terms and conditions as the United
States approves, and Defendants must assist the Trustee in
fulfilling his or her obligations. The Monitoring Trustee would file
reports with the United States and, as appropriate, the Court, every
90 days and would serve until the later of January 1, 2020 or the
expiration of the administrative services agreement described in
Paragraph IV(H) of the Final Judgment.
The proposed Final Judgment also contains provisions designed to
promote compliance and make the enforcement of Division consent
decrees as effective as possible. The proposed Final Judgment
provides the United States with the ability to investigate
Defendants' compliance with the Final Judgment and expressly retains
and reserves all rights for the United States to enforce the
provisions of the proposed Final Judgment, including its rights to
seek an order of contempt from the Court. Defendants have agreed
that in any civil contempt action, any motion to show cause, or any
similar action brought by the United States regarding an alleged
violation of the Final Judgment, the United States may establish the
violation and the appropriateness of any remedy by a preponderance
of the evidence and that Defendants have waived any argument that a
different standard of proof should apply. This provision aligns the
standard for compliance obligations with the standard of proof that
applies to the underlying offense that the compliance commitments
address.
Paragraph XV(B) provides additional clarification regarding the
interpretation of the provisions of the proposed Final Judgment. The
proposed Final Judgment was drafted to restore competition that
would otherwise be harmed by the merger. Defendants agree that they
will abide by the proposed Final Judgment and that they may be held
in contempt of this Court for failing to comply with any provision
of the proposed Final Judgment that is stated specifically and in
reasonable detail, as interpreted in light of this procompetitive
purpose.
Should the Court find in an enforcement proceeding that
Defendants have violated the Final Judgment, the United States may
apply to the Court for a one-time extension of the Final Judgment,
together with such other relief as may be appropriate. In addition,
in order to compensate American taxpayers for any costs associated
with the investigation and enforcement of violations of the Final
Judgment, Defendants agree to reimburse the United States for
attorneys' fees, experts' fees, and costs, including fees and costs
relating to the investigation of the potential violation, incurred
in connection with any successful effort by the United States to
enforce the Final Judgment against a Defendant, whether litigated or
resolved before litigation.
The Final Judgment will expire ten years from the date of its
entry. After five years, however, the United States may request that
the Court terminate the Final Judgment if the divestitures have been
completed and the continuation of the Final Judgment is no longer
necessary or in the public interest.
IV. Remedies Available To Potential Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that
any person who has been injured as a result of conduct prohibited by
the antitrust laws may bring suit in federal court to recover three
times the damages the person has suffered, as well as costs and
reasonable attorneys' fees. Entry of the proposed Final Judgment
will neither impair nor assist the bringing of any private antitrust
damage action. Under the provisions of Section 5(a) of the Clayton
Act, 15 U.S.C. Sec. 16(a), the proposed Final Judgment has no prima
facie effect in any subsequent private lawsuit that may be brought
against Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants have stipulated that the
proposed Final Judgment may be entered by the Court after compliance
with the provisions of the APPA, provided that the United States has
not withdrawn its consent. The APPA conditions entry upon the
Court's determination that the proposed Final Judgment is in the
public interest.
The APPA provides a period of at least 60 days preceding the
effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding
the proposed Final Judgment. Any person who wishes to comment should
do so within 60 days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this
period will be considered by the United States, which remains free
to withdraw its consent to the proposed Final Judgment at any time
before the Court's entry of judgment. The comments and the response
of the United States will be filed with the Court. In addition,
comments will be posted on the U.S. Department of Justice, Antitrust
Division's internet website and, under certain circumstances,
published in the Federal Register.
Written comments should be submitted to:
Peter Mucchetti,
Chief, Healthcare and Consumer Products Section,
Antitrust Division,
United States Department of Justice,
450 Fifth Street NW, Suite 4100,
Washington, DC 20530
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the
Court for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against Defendants. The
United States could have continued the litigation and sought
preliminary and permanent injunctions against CVS's acquisition of
Aetna. The United States is satisfied, however, that the divestiture
of assets described in the proposed Final Judgment will preserve
competition for the sale of individual PDPs in the relevant markets
identified by the United States. Thus, the proposed Final Judgment
would achieve all or substantially all of the relief the United
States would have obtained through litigation, but avoids the time,
expense, and uncertainty of a full trial on the merits of the
Complaint.
VII. Standard of Review Under the APPA for the Proposed Final Judgment
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a 60-day comment period, after which the court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. Sec. 16(e)(1). In making that
determination, the court, in accordance with the statute as amended
in 2004, is required to consider:
(A) the competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative
remedies actually considered, whether its terms are ambiguous, and
any other competitive considerations bearing upon the adequacy of
such judgment that the court deems necessary to a determination of
whether the consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. Sec. 16(e)(1)(A) & (B). In considering these statutory
factors, the court's inquiry is necessarily a limited one as the
government is entitled to ``broad discretion to settle with the
defendant within the reaches of the public interest.'' United States
v. Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see
generally United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1
(D.D.C. 2007) (assessing public interest standard under the Tunney
Act); United States v. U.S. Airways Group, Inc., 38 F. Supp. 3d 69,
75 (D.D.C. 2014) (noting the court has broad
[[Page 52569]]
discretion of the adequacy of the relief at issue); United States v.
InBev N.V./S.A., No. 08-1965 (JR), 2009-2 Trade Cas. (CCH) ] 76,736,
2009 U.S. Dist. LEXIS 84787, at *3, (D.D.C. Aug. 11, 2009) (noting
that the court's review of a consent judgment is limited and only
inquires ``into whether the government's determination that the
proposed remedies will cure the antitrust violations alleged in the
complaint was reasonable, and whether the mechanism to enforce the
final judgment are clear and manageable'').\1\
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\1\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for courts to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
Sec. 16(e) (2004), with 15 U.S.C. Sec. 16(e)(1) (2006); see also
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004
amendments ``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------
As the U.S. Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other
things, the relationship between the remedy secured and the specific
allegations set forth in the government's complaint, whether the
decree is sufficiently clear, whether enforcement mechanisms are
sufficient, and whether the decree may positively harm third
parties. See Microsoft, 56 F.3d at 1458-62. With respect to the
adequacy of the relief secured by the decree, a court may not
``engage in an unrestricted evaluation of what relief would best
serve the public.'' United States v. BNS, Inc., 858 F.2d 456, 462
(9th Cir. 1988) (quoting United States v. Bechtel Corp., 648 F.2d
660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62;
United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001);
InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have held that:
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations
omitted).\2\ In determining whether a proposed settlement is in the
public interest, a district court ``must accord deference to the
government's predictions about the efficacy of its remedies, and may
not require that the remedies perfectly match the alleged
violations.'' SBC Commc'ns, 489 F. Supp. 2d at 17; see also U.S.
Airways, 38 F. Supp. 3d at 75 (noting that a court should not reject
the proposed remedies because it believes others are preferable);
Microsoft, 56 F.3d at 1461 (noting the need for courts to be
``deferential to the government's predictions as to the effect of
the proposed remedies''); United States v. Archer-Daniels-Midland
Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court
should grant due respect to the United States' prediction as to the
effect of proposed remedies, its perception of the market structure,
and its views of the nature of the case).
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\2\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest' '').
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Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be
approved even if it falls short of the remedy the court would impose
on its own, as long as it falls within the range of acceptability or
is `within the reaches of public interest.' '' United States v. Am.
Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations
omitted) (quoting United States v. Gillette Co., 406 F. Supp. 713,
716 (D. Mass. 1975)), aff'd sub nom. Maryland v. United States, 460
U.S. 1001 (1983); see also U.S. Airways, 38 F. Supp. 3d at 74
(noting that room must be made for the government to grant
concessions in the negotiation process for settlements (citing
Microsoft, 56 F.3d at 1461)); United States v. Alcan Aluminum Ltd.,
605 F. Supp. 619, 622 (W.D. Ky. 1985) (approving the consent decree
even though the court would have imposed a greater remedy). To meet
this standard, the United States ``need only provide a factual basis
for concluding that the settlements are reasonably adequate remedies
for the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17.
Moreover, the court's role under the APPA is limited to
reviewing the remedy in relationship to the violations that the
United States has alleged in its Complaint, and does not authorize
the court to ``construct [its] own hypothetical case and then
evaluate the decree against that case.'' Microsoft, 56 F.3d at 1459;
see also U.S. Airways, 38 F. Supp. 3d at 74 (noting that the court
must simply determine whether there is a factual foundation for the
government's decisions such that its conclusions regarding the
proposed settlements are reasonable); InBev, 2009 U.S. Dist. LEXIS
84787, at *20 (``[T]he `public interest' is not to be measured by
comparing the violations alleged in the complaint against those the
court believes could have, or even should have, been alleged.'').
Because the ``court's authority to review the decree depends
entirely on the government's exercising its prosecutorial discretion
by bringing a case in the first place,'' it follows that ``the court
is only authorized to review the decree itself,'' and not to
``effectively redraft the complaint'' to inquire into other matters
that the United States did not pursue. Microsoft, 56 F.3d at 1459-
60. As this Court recently confirmed in SBC Communications, courts
``cannot look beyond the complaint in making the public interest
determination unless the complaint is drafted so narrowly as to make
a mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to
preserve the practical benefits of utilizing consent decrees in
antitrust enforcement, adding the unambiguous instruction that
``[n]othing in this section shall be construed to require the court
to conduct an evidentiary hearing or to require the court to permit
anyone to intervene.'' 15 U.S.C. Sec. 16(e)(2); see also U.S.
Airways, 38 F. Supp. 3d at 75 (indicating that a court is not
required to hold an evidentiary hearing or to permit intervenors as
part of its review under the Tunney Act). The language wrote into
the statute what Congress intended when it enacted the Tunney Act in
1974, as Senator Tunney explained: ``[t]he court is nowhere
compelled to go to trial or to engage in extended proceedings which
might have the effect of vitiating the benefits of prompt and less
costly settlement through the consent decree process.'' 119 Cong.
Rec. 24,598 (1973) (statement of Sen. Tunney). Rather, the procedure
for the public interest determination is left to the discretion of
the court, with the recognition that the court's ``scope of review
remains sharply proscribed by precedent and the nature of Tunney Act
proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at 11.\3\ A court can
make its public interest determination based on the competitive
impact statement and response to public comments alone. U.S.
Airways, 38 F. Supp. 3d at 75.
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\3\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., No. 73-CV-681-W-1, 1977-1
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (W.D. Mo. 1977) (``Absent
a showing of corrupt failure of the government to discharge its
duty, the Court, in making its public interest finding, should . . .
carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, at 6 (1973) (``Where the
public interest can be meaningfully evaluated simply on the basis of
briefs and oral arguments, that is the approach that should be
utilized.'').
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VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: October 10, 2018.
Respectfully submitted,
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Jay D. Owen,
Andrew J. Robinson, U.S. Department of Justice, Antitrust Division,
450 Fifth Street NW, Suite 4100, Washington, DC 20530, Tel.: (202)
598-2987, Fax: (202) 616-2441, E-mail: [email protected].
[FR Doc. 2018-22665 Filed 10-16-18; 8:45 am]
BILLING CODE 4410-11-P