[Federal Register Volume 84, Number 35 (Thursday, February 21, 2019)]
[Notices]
[Pages 5466-5477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02846]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States, et al. v. CVS Health Corporation and Aetna Inc.; 
Response to Public Comments

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the Response to 
Public Comments on the Proposed Final Judgment in United States, et al. 
v. CVS Health Corporation and Aetna Inc., Civil Action No. 1:18-cv-
02340, which was filed in the United States District Court for the 
District of Columbia on February 13, 2019, together with copies of the 
173 comments received by the United States.
    Pursuant to the Court's February 9, 2019 order, comments were 
published electronically and are available to be viewed and downloaded 
at the Antitrust Division's Web site, at: https://www.justice.gov/atr/us-v-cvs-health-corp-and-aetna-inc-index-comments. A copy of the United 
States' response to the comments is also available at the same 
location. Copies of the comments

[[Page 5467]]

and the United States' response are available for inspection at the 
Office of the Clerk of the United States District Court for the 
District of Columbia. Copies of these materials may also be obtained 
from the Antitrust Division upon request and payment of the copying fee 
set by Department of Justice regulations.

Patricia A. Brink,
Director of Civil Enforcement.

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-RJL

RESPONSE OF PLAINTIFF UNITED STATES TO PUBLIC COMMENTS ON THE PROPOSED 
FINAL JUDGMENT

                            Table of Contents
 
 
 
I. Introduction............................................            1
II. Procedural History.....................................            2
III. Standard of Judicial Review...........................            2
IV. The Investigation, the Harm Alleged in the Complaint,              8
 and the Proposed Final Judgment...........................
V. Summary of Public Comments and the United States'                  12
 Response..................................................
    A. Comments Regarding WellCare's Suitability as a                 13
     Divestiture Buyer and Ability to Compete Effectively..
        1. WellCare is an experienced and effective                   13
         competitor........................................
        2. WellCare is an independent competitor to CVS....           17
        3. Prior health insurance merger remedies do not              19
         cast doubt on the divestiture.....................
        4. The remedy does not create new structural                  21
         concerns in the markets for individual PDPs.......
        5. The licensing provisions related to the Aetna              23
         brand protect WellCare's ability to compete using
         the divested assets...............................
        6. The sales price does not cast doubt on                     23
         WellCare's intention to compete...................
    B. Comments Related to the Vertical Aspects of CVS's              24
     Acquisition of Aetna..................................
        1. Input foreclosure is unlikely to occur and is              26
         beyond the scope of the Complaint.................
        2. Customer foreclosure is unlikely to occur and is           27
         beyond the scope of the Complaint.................
        3. Vertical concerns are not addressable under the            29
         Tunney Act's standard of review...................
    C. Other Miscellaneous Comments........................           30
    D. Comments in Support of the Merger...................           34
VI. Conclusion.............................................           35
 

I. Introduction

    As required by the Antitrust Procedures and Penalties Act (the 
``APPA'' or ``Tunney Act''), 15 U.S.C. Sec. Sec.  16(b)-(h), the United 
States hereby responds to the public comments received about the 
proposed Final Judgment in this case. After careful consideration of 
the comments, the United States continues to believe that the proposed 
remedy will address the harm alleged in the Complaint and is therefore 
in the public interest.
    The remedy preserves competition for the approximately 21 million 
beneficiaries who purchase individual prescription drug plans 
(``individual PDPs'') in the United States. The remedy fully addresses 
the competitive threat posed by the merger by requiring CVS to divest 
Aetna's nationwide individual PDP business to WellCare Health Plans, 
Inc., an experienced health insurer focused on government-sponsored 
health plans, including individual PDPs. By requiring a nationwide 
divestiture, the remedy provides WellCare with the assets and scale 
necessary to maintain competition in the 16 regions identified in the 
Complaint. The remedy also provides WellCare with access to all of the 
records, employees, and other rights necessary to ensure that WellCare 
can step into Aetna's shoes. The remedy thus preserves the competition 
that otherwise would be lost through the merger and ensures that 
WellCare will effectively replace Aetna as an independent and vigorous 
competitor.
    The United States received 173 comments about the proposed remedy 
reflecting a wide range of views. Some comments supported the merger. 
Other comments acknowledged the significant scope of the divestiture, 
but expressed concerns about the divestiture buyer. Many comments 
raised issues that are outside the scope of the Tunney Act review. 
After careful consideration of these comments, the United States 
maintains that the remedy in the proposed Final Judgment provides 
comprehensive relief that satisfies the Tunney Act's public-interest 
standard.
    The United States will publish the comments and this response on 
the Antitrust Division's website and is submitting to the Federal 
Register this response and the website address at which the comments 
may be viewed and downloaded, as authorized by the Court's order dated 
February 9, 2019. Following Federal Register publication, the United 
States will move the Court to enter the proposed Final Judgment.

II. Procedural History

    On December 3, 2017, CVS entered into an agreement to acquire Aetna 
in a merger valued at approximately $69 billion. On October 10, 2018, 
the United States filed a civil antitrust Complaint seeking to enjoin 
CVS from acquiring Aetna because the proposed acquisition would 
substantially lessen competition for the sale of individual PDPs in 16 
regions in the United States in violation of Section 7 of the Clayton 
Act, 15 U.S.C. Sec.  18.
    Simultaneously with the filing of the Complaint, the United States 
filed a proposed Final Judgment, a Stipulation signed by the parties 
that consents to entry of the proposed Final Judgment after compliance 
with the requirements of the Tunney Act, and a Competitive Impact 
Statement describing the transaction and the proposed Final Judgment. 
The United States caused the Complaint, the proposed Final Judgment, 
and Competitive Impact Statement to be published in the Federal 
Register on October 17, 2018, see 83 Fed. Reg. 52558 (October 17, 
2018), and caused notice regarding the same, together with directions 
for the submission of written comments relating to the proposed Final 
Judgment, to be published in The Washington Post on October 12-18, 
2018. The 60-day period for public comment ended on December 17, 2018.

III. Standard of Judicial Review

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by

[[Page 5468]]

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) 
(explaining that the ``court's inquiry is limited'' in Tunney Act 
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 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'').
    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 in 
the government's complaint, whether the decree is sufficiently clear, 
whether its 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. Instead:

[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).\1\
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    \1\ See also 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'').
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    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 74-75 (noting that a court should not reject the proposed remedies 
because it believes others are preferable and that room must be made 
for the government to grant concessions in the negotiation process for 
settlements); 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 government's prediction as to the effect of 
proposed remedies, its perception of the market structure, and its 
views of the nature of the case''). The ultimate question is 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.' '' Microsoft, 56 F.3d at 1461 (quoting United States v. 
Western Elec. Co., 900 F.2d 283, 309 (D.C. Cir. 1990)). 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, under Microsoft, 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 75 (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 (``the 
`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. To inquire about claims that are not in a complaint 
would violate the separation of powers and aggravate the 
``constitutional difficulties that inhere in this statute.'' See United 
States' December 14, 2018 Response to Order to Show Cause, Dkt. #32 at 
3-7 (discussing the constitutional difficulties with the Tunney Act); 
see also Microsoft 56 F.3d at 1459; United States v. Fokker Servs., 818 
F.3d 733, 738 (D.C. Cir. 2016) (recognizing the ``long-settled 
understandings about the independence of the Executive with regard to 
charging decisions''); Heckler v. Chaney, 470 U.S. 821, 832 (1985) 
(quoting U.S. Const. art. II, Sec.  3) (recognizing that the decision 
about which claims to bring ``has long been regarded as the special 
province of the Executive Branch.'').
    An amicus brief filed by the AIDS Healthcare Foundation erroneously 
argues that the 2004 amendments to the Tunney Act overrule Microsoft, 
allowing courts to consider allegations that are not in the 
complaint.\2\ In fact, however, the amendments addressed a separate 
issue. In the Microsoft opinion, after the court held that the Tunney 
Act does not allow courts to look beyond the

[[Page 5469]]

scope of the complaint, the opinion says that a district judge is not 
obliged to accept a consent decree that ``appears to make a mockery of 
judicial power.'' 56 F.3d at 1462. According to legislative history of 
the 2004 amendments, Congress was concerned that subsequent courts had 
taken this latter language too far, limiting their review solely to the 
question of whether ``antitrust consent judgments'' would make ``a 
mockery of the judicial function.'' \3\ As a result, Congress changed 
the language of Sec.  16(e) from saying that the court ``may'' consider 
the public-interest factors to the court ``shall'' consider those 
factors, making them mandatory.\4\ Congress also modified the list of 
factors, for example, adding a new factor (whether the terms of the 
judgment are ambiguous \5\), which the Microsoft court had already made 
clear was appropriate to consider, 56 F.3d at 1461-62. Thus, as Senator 
Hatch observed, ``this amendment essentially codifies existing case 
law.'' \6\ See also SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding 
that the 2004 amendments ``effected minimal changes'' to the Tunney Act 
review).
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    \2\ Amicus Brief from the AIDS Healthcare Foundation, Dkt. #50-
1.
    \3\ Antitrust Criminal Penalty Enhancement and Reform Act of 
2004, Pub. L. No. 108-237, tit. II, Sec.  221(a), 118 Stat. 661, 668 
(2004) (finding that ``it would misconstrue the meaning and 
Congressional intent in enacting the Tunney Act to limit the 
discretion of district courts to review antitrust consent judgments 
solely to determining whether entry of those consent judgments would 
make a `mockery of the judicial function.' '').
    \4\ Compare 15 U.S.C. Sec.  16(e) (2004), with 15 U.S.C. Sec.  
16(e)(1) (2006).
    \5\ 15 U.S.C. Sec.  16 (e)(1)(A).
    \6\ 150 Cong. Rec. S3610, at S3613 (daily ed. Apr. 2, 2004).
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    Indeed, rather than overruling Microsoft, the 2004 amendments 
reaffirm that courts should focus solely on how the judgment impacts 
the harms alleged in the complaint by (1) keeping the language in Sec.  
16(e) that directs courts to limit their analysis to the competitive 
impact of the ``consent judgment,'' \7\ (2) adding language that 
directs courts to consider competition ``in the relevant market or 
markets,'' \8\ and (3) making those considerations mandatory rather 
than permissive. As Senator Kohl's floor statement explained, ``A 
mandate to review the impact of entry of the consent judgment upon 
`competition in the relevant market or markets' . . . will ensure that 
the Tunney Act review is properly focused on the likely competitive 
impact of the judgment, rather than extraneous factors irrelevant to 
the purposes of antitrust enforcement.'' \9\
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    \7\ 15 U.S.C. Sec.  16(e)(1).
    \8\ Compare 15 U.S.C. Sec.  16(e) (2004), with 15 U.S.C. Sec.  
16(e)(1)(B) (2006).
    \9\ 150 Cong. Rec. S3618 (statement of Sen. Kohl).
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    Finally, in the 2004 amendments, Congress addressed the Tunney Act 
review process, 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 76 (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). This language explicitly wrote into the statute 
what Congress intended when it first 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. 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 76; see also 
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''); S. Rep. No. 93-298 93d 
Cong., 1st Sess., 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.'').

IV. The Investigation, the Harm Alleged in the Complaint, and the 
Proposed Final Judgment

    The proposed Final Judgment is the culmination of a thorough, 
comprehensive investigation conducted by the Antitrust Division of the 
U.S. Department of Justice into CVS's proposed acquisition of Aetna. As 
noted in the Complaint, CVS is one of the largest companies in the 
United States. It operates the nation's largest retail pharmacy chain. 
It owns a large pharmacy benefit manager (``PBM'') called Caremark, 
which manages the pharmacy benefits for various health plans and 
negotiates their drug pricing with pharmaceutical companies and retail 
pharmacies. Through its subsidiary called SilverScript, CVS is also the 
nation's largest provider of individual PDPs, which provide Medicare 
beneficiaries with insurance coverage for their prescription drugs. 
Aetna is the nation's third largest health insurer and, before the 
divestiture, offered individual PDPs throughout the United States.
    Based on the evidence gathered during its investigation, the United 
States concluded that CVS's proposed acquisition of Aetna would likely 
substantially lessen competition for the sale of individual PDPs in the 
16 geographic regions where CVS and Aetna are particularly strong, 
resulting in higher prices, less innovation, fewer choices, and lower-
quality individual PDPs for Medicare beneficiaries in these regions. 
Accordingly, the United States filed a civil antitrust lawsuit to block 
the acquisition as a violation of Section 7 of the Clayton Act, 15 
U.S.C. Sec.  18.
    The proposed Final Judgment provides an effective and appropriate 
remedy for the transaction's likely competitive harm by requiring CVS 
to divest Aetna's individual PDP business nationwide. The proposed 
Final Judgment has several components, which the parties agreed to 
abide by during the pendency of the Tunney Act proceeding, and which 
the Court ordered in the Asset Preservation Stipulation and Order of 
October 25, 2018, Dkt.  15.
    First, CVS must divest both of Aetna's individual PDP contracts 
with the Centers for Medicare and Medicaid Services (``CMS''), which is 
the federal agency that administers the PDP program. Aetna's individual 
PDP business was the only portion of Aetna's business where the merger 
with CVS would have caused a substantial lessening of competition. 
Divesting Aetna's nationwide individual PDP business--and not just 
Aetna's business in the regions identified in the Complaint--provides 
WellCare with the same scale and capabilities to implement a national 
PDP strategy as Aetna had before the merger. Aetna's individual PDP 
contracts were transferred to WellCare on November 29, 2018. From 
December 2018 to January 2019, WellCare's enrollment in its legacy PDP 
plans increased by over 400,000 members nationwide, and its market 
share grew in all 34 PDP regions. The enrollment in the divested Aetna 
plans also grew, adding over 140,000 members.\10\
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    \10\ See CMS Monthly Enrollment by CPSC for January 2019, 
available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-Enrollment-by-Contract-Plan-State-County-Items/Monthly-Enrollment-by-CPSC-2019-01.html?DLPage=1&DLEntries=10&DLSort=1&DLSortDir=descending.

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[[Page 5470]]

    Second, the proposed Final Judgment requires CVS and Aetna to 
transfer to WellCare (1) data relating to Aetna's individual PDP 
business, (2) information regarding the amount that Aetna pays to 
retail pharmacies in exchange for filling prescriptions for Aetna 
members, and (3) any contracts with brokers that currently sell Aetna's 
individual PDPs. The transfer of this data, information, and contracts 
helps ensure that WellCare has sufficient information to negotiate with 
retail pharmacies and brokers on the same footing as Aetna did before 
the merger.
    Third, during the 60-day period following the sale to WellCare, the 
proposed Final Judgment has provided WellCare the opportunity to 
interview and hire Aetna's current employees with expertise related to 
the individual PDP business. The transfer of data and recruiting of 
Aetna employees are moving forward according to the terms of the 
proposed Final Judgment.
    The proposed Final Judgment also includes provisions aimed at 
ensuring that the divested assets are handed off in a seamless and 
efficient manner, particularly for the two key competitive events for 
individual PDPs: the submission of bids to CMS each June (for the 
following year) and open-enrollment season for members, which occurs 
from October through December. In this case, before the contracts were 
transferred to WellCare on November 29, 2018, Aetna had already 
submitted its bids for the divestiture assets and open-enrollment was 
well under way. Thus, to assist WellCare during the 2019 plan year, CVS 
must, at WellCare's option, enter into an administrative services 
agreement to provide WellCare with all of the services required to 
manage the divestiture assets through the plan year, which ends on 
December 31, 2019. These services include contracting with pharmacy 
networks, administering the plans' formularies, and providing back-
office support and claims administration functions. Requiring CVS to 
support and service these plans provides continuity to members who 
purchased an Aetna individual PDP during the open-enrollment period 
that ran from October through December 2018 and will ensure that 
members receive the plans that they have chosen. CVS and WellCare have 
entered into an administrative services agreement and, since the 
divestiture, CVS has been providing WellCare with the necessary 
services to manage the divestiture assets in 2019 while WellCare has 
begun preparing for the June 2019 submission of its bid for 2020.
    Additionally, CVS and Aetna must allow WellCare to use the Aetna 
brand for the divestiture assets through 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 
WellCare with a window to establish a relationship with current Aetna 
individual PDP beneficiaries and avoid customer confusion.
    The proposed Final Judgment also includes robust mechanisms that 
will allow the United States and the Court to monitor the effectiveness 
of the relief and to enforce compliance. For example, the proposed 
Final Judgment provides for the appointment of a monitoring trustee, 
which the Court appointed on December 3, 2018. As a result, the 
monitoring trustee, Ms. Julie Myers Wood, is actively working to ensure 
that the divestiture proceeds appropriately. She has 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 and is required to file 
reports with the United States every 90 days. In addition, 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.
    Together, the requirements in the proposed Final Judgment ensure 
that WellCare can step into Aetna's shoes, thereby preserving the 
competition that the merger would otherwise destroy.

V. Summary of Public Comments and the United States' Response

    The United States received 173 comments \11\ from different 
categories of commenters. These commenters included advocacy groups, 
such as the American Medical Association (``AMA''), the American 
Antitrust Institute (``AAI''), Consumer Action and U.S. PIRG, and the 
Medical Society of the State of New York (``MSSNY''). In addition, the 
United States received comments from several groups representing 
pharmacists that compete with CVS, including the National Community 
Pharmacists Association (``NCPA''), the Pharmacists Society of the 
State of New York (``PSSNY''), and Pharmacists United for Truth and 
Transparency (``PUTT''), as well as approximately 120 individual 
pharmacies. The United States also received a handful of comments from 
business associations and healthcare industry associations.
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    \11\ These comments are provided as attachments TC-001 through 
TC-085. Aside from redactions of personally identifiable information 
such as personal email addresses, phone numbers, and patient 
information, the comments are provided in their entirety. Four 
groups of substantially similar comments are included together as 
attachments TC-007, TC-020, TC-057 and TC-061. Amicus filings made 
before the end of the comment period by (1) Consumer Action and U.S. 
PIRG and (2) PUTT and PSSNY are included as attachments TC-023 and 
TC-060, respectively.
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    The comments can be grouped into four categories: (1) comments 
about WellCare's suitability as a divestiture buyer, including whether 
it will have sufficient assets, expertise, and incentives to preserve 
competition; (2) comments related to the vertical combination of CVS's 
pharmacy and PBM businesses with Aetna's health insurance businesses; 
(3) other miscellaneous comments, including questions about whether the 
merger will facilitate coordination, have anticompetitive effects in 
various healthcare markets, increase entry barriers in the PBM or 
health insurance markets, or reduce PBM competition by eliminating 
Aetna as a PBM competitor; and (4) comments in support of the merger. 
The Court's analysis under the Tunney Act should focus on the first 
category of comments, as they are the only comments that relate to 
whether the proposed remedy addresses the harms alleged in the 
Complaint. See Microsoft, 56 F.3d at 1459.

A. Comments Regarding WellCare's Suitability as a Divestiture Buyer and 
Ability to Compete Effectively

    WellCare has extensive experience and qualifications in the 
individual PDP market and, with the assets provided by the proposed 
Final Judgment, is a suitable divestiture buyer. Although the AMA, 
Consumer Action and U.S. PIRG, NCPA, PUTT and PSSNY, and numerous 
independent pharmacies, raised concerns regarding WellCare as the buyer 
of the divested assets, none of those concerns is valid for the reasons 
explained below.\12\ These commenters raised six primary objections: 
(1) WellCare will not compete as effectively as Aetna; (2) WellCare 
will not operate independently of CVS because WellCare uses CVS's PBM, 
Caremark; (3) some

[[Page 5471]]

health insurance divestitures have not been successful, indicating that 
the divestiture to WellCare may not be successful; (4) the divestiture 
creates new structural concerns in the markets for the sale of 
individual PDPs; (5) the divestiture raises concerns related to 
WellCare's license of the Aetna brand; and (6) the divestiture sales 
price is too low.
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    \12\ TC-003, TC-015, TC-023, TC-024, TC-047, TC-054, TC-059, TC-
060, TC-061, TC-063, TC-064, TC-072, TC-080, TC-081, and TC-085.
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1. WellCare is an experienced and effective competitor.

    WellCare has experience and qualifications in government-funded 
insurance programs. Despite this, commenters said that WellCare may not 
compete as effectively as Aetna in individual PDP markets because 
WellCare is smaller and less capable than Aetna and because WellCare is 
not purchasing a stand-alone business unit; these concerns are 
misplaced.\13\ Although Aetna's overall membership is larger when 
taking into account its commercial business, WellCare is already a 
large and established insurer that has competed in the markets for 
individual PDPs for over a decade. WellCare is a Fortune 200 company 
with over 12,000 employees, 5.5 million members, and a market 
capitalization of approximately $15 billion. Even before acquiring over 
2.1 million members from Aetna as part of the divested business, 
WellCare had attracted nearly 1.1 million individuals in its PDPs 
throughout the United States. WellCare is thus starting from a strong 
base and its acquisition of all of Aetna's individual PDP business will 
enable WellCare to improve its PDP business and become a more 
significant competitor.
---------------------------------------------------------------------------

    \13\ See, e.g., TC-003, TC-024, and TC-060.
---------------------------------------------------------------------------

    Some commenters expressed a concern that, despite its size, 
WellCare will not be as competitive as Aetna because Aetna's overall 
health insurance business was larger than that of WellCare.\14\ Before 
the divestiture, however, WellCare already competed successfully as a 
smaller competitor than Aetna. From 2018 to 2019, WellCare organically 
grew its business by over 40 percent, from approximately 1 million 
members to over 1.4 million members.\15\ More importantly, with the 
acquisition of Aetna's individual PDP business, WellCare's total 
individual PDP membership is well over three million members, 
approximately 50 percent more than Aetna's pre-divestiture individual 
PDP membership. Following the divestiture, WellCare will be well-
positioned to achieve any benefits of scale that Aetna had enjoyed in 
its individual PDP business, enabling it to be an even more formidable 
competitor than it previously was and ensuring that the remedy is well 
within the ``reaches of the public interest,'' as required under the 
Tunney Act. See Microsoft, 56 F.3d at 1461.
---------------------------------------------------------------------------

    \14\ See, e.g., TC-003, TC-024.
    \15\ See CMS Monthly Enrollment by CPSC for January 2019, 
available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-Enrollment-by-Contract-Plan-State-County-Items/Monthly-Enrollment-by-CPSC-2019-01.html?DLPage=1&DLEntries=10&DLSort=1&DLSortDir=descending.
---------------------------------------------------------------------------

    Concerns that WellCare is not getting enough assets or a stand-
alone business unit from Aetna misunderstand the context of the remedy 
here.\16\ The Antitrust Division's experience, as reflected in the 2004 
Policy Guide to Merger Remedies,\17\ is that in some instances, an in-
market buyer does not need a stand-alone business unit to be 
successful: ``The Division will approve the divestiture of less than an 
existing business entity if the evidence clearly demonstrates that 
certain of the entity's assets already are in the possession of, or 
readily obtainable in a competitive market by, the potential 
purchaser.''\18\
---------------------------------------------------------------------------

    \16\ See, e.g., TC-024, TC-060.
    \17\ This is the operative guide on remedies following the 
September 25, 2018 withdrawal of the 2011 Policy Guide to Merger 
Remedies. See Makan Delrahim, It Takes Two: Modernizing the Merger 
Review Process, Remarks at the 2018 Global Antitrust Enforcement 
Symposium (September 25, 2018), available at https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-2018-global-antitrust.
    \18\ Antitrust Division Policy Guide to Merger Remedies, October 
2004, at 14, available at https://www.justice.gov/sites/default/files/atr/legacy/2011/06/16/205108.pdf.
---------------------------------------------------------------------------

    Consistent with this principle, the proposed Final Judgment ensures 
that WellCare will have all that it needs to preserve competition in 
the sale of individual PDPs. WellCare has purchased Aetna's entire 
individual PDP business throughout the United States, including the 
relevant contracts, the right to hire employees, and access to all 
relevant data. Focusing on a stand-alone ``business unit'' in this case 
ignores the critical fact that WellCare already offers individual PDPs 
throughout the United States, is licensed in all 50 states, and has 
scalable in-house capabilities that it does not need to duplicate. 
These capabilities include experience competing in individual PDP 
markets throughout the country, actuarial expertise, as well as 
clinical and administrative resources. Because of these existing 
capabilities, WellCare does not need to acquire a stand-alone business 
unit to compete for the sale of individual PDPs. Instead, WellCare is 
acquiring key competitive assets that complement its existing 
capabilities and allow WellCare to step quickly and effectively into 
Aetna's shoes as a significant competitor for the sale of individual 
PDPs.
    Despite WellCare's in-market expertise, the joint comments by 
Consumer Action and U.S. PIRG \19\ and PUTT and PSSNY \20\ erroneously 
argue that WellCare is similarly situated to Molina, the proposed 
divestiture buyer of Aetna's Medicare Advantage business that Judge 
Bates rejected in an opinion enjoining Aetna's proposed acquisition of 
Humana.\21\ This concern fails to appreciate that WellCare is 
differently situated than Molina in several ways. Unlike Molina, which 
had ``made forays into the individual Medicare Advantage market'' but 
never succeeded,\22\ WellCare has consistently maintained a presence in 
the individual PDP business since the program's inception in 2006. 
Also, Aetna proposed to divest only small portions of each of the 
merging parties' Medicare Advantage business to Molina. In contrast, 
while WellCare has not purchased a stand-alone business unit, it has 
purchased Aetna's entire individual PDP business, including Aetna's 
business outside the affected geographic markets. Medicare Advantage 
products also differ significantly from individual PDP products. In 
addition to the pharmacy networks used by PDPs, Medicare Advantage 
products require a comprehensive network of hospitals, doctors, and 
other healthcare providers at competitive rates. In Aetna/Humana, 
Molina had no presence at all in 89 percent of the counties referenced 
in the United States' complaint and no Medicare presence in 95 percent 
of the counties, so the company would have needed to build its own 
provider network to compete in the market.\23\ By contrast, WellCare 
already has an extensive pharmacy network that it uses to sell 
individual PDPs throughout the United States and will not have to 
assemble any new networks in any region to offer individual PDPs. Thus, 
unlike Molina in Aetna/Humana, WellCare is both purchasing an entire 
business and is a qualified buyer with the assets and capabilities to 
continue competing successfully.
---------------------------------------------------------------------------

    \19\ TC-023 at 3-4, TC-024 at 5-6.
    \20\ TC-060 at 21.
    \21\ United States v. Aetna, Inc., 240 F. Supp. 3d 1, 73 (D.D.C. 
2017).
    \22\ Id. at 62.
    \23\ Id. at 65.

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[[Page 5472]]

2. WellCare is an independent competitor to CVS.

    Although some commenters raised concerns that WellCare will not 
operate independently of CVS because WellCare uses Caremark (which CVS 
owns) as its PBM,\24\ the United States carefully considered this 
relationship in evaluating WellCare's suitability as the divestiture 
buyer and ultimately concluded that WellCare will continue to be an 
independent competitor to CVS for several reasons.
---------------------------------------------------------------------------

    \24\ See, e.g., TC-003, TC-015, TC-060, TC-061, and TC-080.
---------------------------------------------------------------------------

    First, CVS has no governance control over WellCare. Rather, 
WellCare is a separate corporate entity with an independent board of 
directors. Second, CVS and WellCare do not have common financial 
incentives. As a separate company, WellCare is driven to focus on its 
own business and compete vigorously against CVS. Third, while WellCare 
may make the independent business decision to use Caremark rather than 
its other PBM options, nothing in the proposed Final Judgment requires 
WellCare to do so. In fact, WellCare recently announced that it is 
putting its PBM services contract out to bid in the summer of 2019.\25\ 
Fourth, WellCare recently acquired a small PBM called Meridian, which 
improves WellCare's ability to provide its own PBM services. Finally, 
Caremark's business has internal firewalls designed to prevent 
insurance customers' information from being shared with SilverScript 
and other insurance customers. This means that WellCare, like all of 
Caremark's health plan customers, can make its own independent business 
decisions with the protections these firewalls provide against the risk 
that SilverScript, or any other Caremark customer, will have access to 
competitively sensitive information or advance knowledge of its 
business plans and other competitive decisions.
---------------------------------------------------------------------------

    \25\ See ``WellCare Fourth Quarter 2018 Earnings Conference Call 
Transcript'' (February 5, 2019) available at https://www.fool.com/earnings/call-transcripts/2019/02/05/wellcare-health-plans-inc-wcg-q4-2018-earnings-con.aspx (last visited February 13, 2019).
---------------------------------------------------------------------------

    Because WellCare retains control of the divestiture assets and has 
the financial incentive to use them in its best interests, rather than 
CVS's, WellCare's relationship with Caremark does not change the 
conclusion that the proposed remedy is in the public interest. This 
conclusion is bolstered by the success of Aetna's individual PDP plans, 
which used Caremark for PBM services before the merger, showing that a 
relationship with Caremark does not impede an individual PDP's 
competitiveness. Similarly, WellCare has also competed against CVS's 
SilverScript business for many years despite using Caremark for PBM 
services.
    Other comments incorrectly suggest that, because the proposed Final 
Judgment includes transition services agreements for 2019, WellCare 
will not operate the divestiture assets independently of CVS.\26\ As 
described above, the proposed Final Judgment requires that, at 
WellCare's option, CVS must enter into an administrative services 
agreement to provide WellCare with all of the services required to 
manage the divestiture assets through the 2019 plan year. CVS must 
offer these services at the direction of WellCare and subject to the 
review of both the monitoring trustee and the United States, whose 
oversight will likely deter any attempts to undermine WellCare's 
competitiveness.
---------------------------------------------------------------------------

    \26\ TC-003, TC-023, and TC-024.
---------------------------------------------------------------------------

    The transition services agreements are also only in place through 
2019. This temporary arrangement provides continuity to members who 
purchased an Aetna individual PDP during the open-enrollment period 
that ran from October through December 2018, but ends when plans for 
2020 will become effective. These transition services are necessary for 
the seamless and efficient transition of Aetna's individual PDP 
business to WellCare. Importantly, the agreements do not affect the 
prices, design, coverage amounts, and other terms of the plans WellCare 
is now offering to seniors. Rather, these terms have been fixed for all 
of 2019.
    Further, the monitoring trustee is closely tracking CVS's 
compliance with the terms of the transition services agreements. CVS's 
obligations are clearly stated in the proposed Final Judgment, and the 
monitoring trustee is already ensuring that CVS is fulfilling its 
responsibilities. Because Aetna's contracts with CMS, as well as the 
related data, have been transferred in accordance with the terms of the 
proposed Final Judgment, WellCare has all the assets it needs to 
independently prepare for the next competitive event--the June 2019 
submission of the bid for 2020--which is not impacted by the transition 
services agreements.

3. Prior health insurance merger remedies do not cast doubt on the 
divestiture.

    In 2012, the United States required Humana Inc. and Arcadian 
Management Services Inc. to divest assets relating to Arcadian's 
Medicare Advantage business in 51 counties in five states in order for 
Humana to proceed with an acquisition of Arcadian.\27\ Several 
commenters looked at this and other divestitures in hindsight and 
conclude that they failed or that divestitures in general are not 
successful remedies.\28\ As a general matter, however, the factual 
circumstances in every divestiture are different. Furthermore, the 
concerns that the experience of prior divestitures indicates that the 
divestiture to WellCare will fail in this instance are wrong because 
the circumstances here are different.
---------------------------------------------------------------------------

    \27\ See ``Justice Department Requires Divestitures in Humana 
Inc.'s Acquisition of Arcadian Management Services Inc.,'' available 
at https://www.justice.gov/opa/pr/justice-department-requires-divestitures-humana-incs-acquisition-arcadian-management-services.
    \28\ TC-003, TC-023, TC-024, and TC-060.
---------------------------------------------------------------------------

    Indeed, there are several key differences between this divestiture 
and the ones in Humana/Arcadian, the most important of which is the 
scope of the divestiture. In Humana/Arcadian the divestiture did not 
constitute an entire business, as it included only 12,700 covered lives 
in 51 rural counties and was split between three different acquirers. 
In contrast, CVS has divested Aetna's entire individual PDP business, 
consisting of over two million members and including assets outside the 
markets described in the Complaint. Additionally, similar to Molina in 
Aetna/Humana, the Humana/Arcadian divestitures concerned Medicare 
Advantage products and some of those divestitures went to buyers that 
did not have Medicare Advantage provider networks in the divested 
markets. In contrast, WellCare already has pharmacy networks in every 
region of the United States. Divesting the entire line of business to 
WellCare, a well-positioned buyer, will help ensure that WellCare 
continues to compete effectively and capture additional economies of 
scale across its entire business.
    Despite these factual differences, commenters also note that 
WellCare was the buyer of one set of divested assets in Humana/Arcadian 
and wrongly suggest that, because that divestiture failed, this one 
likely will too.\29\ As described above, the two divestitures are 
substantially different. In Humana/Arcadian, WellCare acquired fewer 
than 5,000 lives in two counties in Arizona. In contrast, WellCare is 
acquiring over 2.1 million individual PDP lives across the United 
States from Aetna. Additionally, as described above,

[[Page 5473]]

WellCare did not have a Medicare Advantage provider network in Arizona 
before the divestiture in Humana/Arcadian while WellCare already has an 
established pharmacy network in place that it can use for the PDP 
business it is acquiring from Aetna. Further, WellCare has grown 
significantly as a company since 2012--more than doubling from 2.7 
million \30\ members to 5.5 million \31\--and overhauled its leadership 
team, including the CEO, CFO, CIO, CMO, and the EVP for Clinical 
Operations.\32\ Because of the larger scale of the current divestiture, 
WellCare's growth as a health insurance company, and its experience and 
existing capabilities with individual PDPs, WellCare's performance with 
the Humana/Arcadian assets does not indicate how successful it will be 
with Aetna's PDP business. Because a district court ``must accord 
deference to the government's predictions about the efficacy of its 
remedies,'' SBC Commc'ns, 489 F. Supp. 2d at 17, and because the 
divestiture to WellCare is readily distinguishable from the ones that 
commenters allege failed in Humana/Arcadian, the Court should afford 
deference to the government's prediction of a successful divestiture in 
this instance.
---------------------------------------------------------------------------

    \29\ TC-023, TC-024, and TC-060; see also Amicus Brief from the 
AIDS Healthcare Foundation, Dkt.  50-1.
    \30\ See ``WellCare 2011 Annual Report'', available at http://ir.wellcare.com/file/4091918/Index?KeyFile=1500074253.
    \31\ See ``WellCare Corporate Overview'', available at https://www.wellcare.com/en/Corporate/Company-Overview (last visited 
February 13, 2019).
    \32\ See ``WellCare Corporate Management Team'', available at 
https://www.wellcare.com/Corporate/Management-Team (last visited 
February 13, 2019).
---------------------------------------------------------------------------

4. The remedy does not create new structural concerns in the markets 
for individual PDPs.

    The AMA incorrectly argues that, because WellCare and Aetna both 
compete in all 34 Medicare regions, the divestiture itself creates 
competitive concerns simply by reducing the number of competitors in 
every region.\33\ The AMA further alleges that, in seven regions, the 
divestiture ``would potentially raise significant competitive concerns 
[that] often warrant scrutiny'' because it exceeds certain Herfindahl-
Hirschman Index (``HHI'') thresholds in the Horizontal Merger 
Guidelines.\34\
---------------------------------------------------------------------------

    \33\ TC-030 at 6-7.
    \34\ Id.
---------------------------------------------------------------------------

    HHIs are a commonly accepted measure of market concentration and 
are calculated by squaring the market share of each firm competing in 
the market and then summing the resulting numbers.\35\ The U.S. 
Department of Justice, consistent with the Federal Trade Commission, 
generally considers markets in which the HHI is between 1,500 and 2,500 
points to be moderately concentrated, and considers markets in which 
the HHI is in excess of 2,500 points to be highly concentrated.\36\ 
Transactions that increase the HHI by more than 100 points in 
moderately concentrated markets or between 100 and 200 points in highly 
concentrated markets ``potentially raise significant competitive 
concerns and often warrant scrutiny.'' \37\ Transactions that increase 
the HHI by more than 200 points in highly concentrated markets are 
``presumed to be likely to enhance market power.'' \38\
---------------------------------------------------------------------------

    \35\ For example, for a market consisting of four firms with 
shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (30\2\ + 
30\2\ + 20\2\ + 20\2\ = 2,600).
    \36\ See U.S. Department of Justice & FTC, Horizontal Merger 
Guidelines Sec.  5.3 (2010), available at https://www.justice.gov/atr/file/810276/download.
    \37\ Id.
    \38\ Id.
---------------------------------------------------------------------------

    In this case, although some regions fall into the category of 
``potentially'' raising concerns under the Horizontal Merger Guidelines 
after the divestiture, no regions are above the threshold for 
``presumed'' concerns. Moreover, as described in the 2010 Horizontal 
Merger Guidelines, while the United States does use HHIs and other 
concentration statistics, such as the number of firms in the market, as 
an important part of its investigative toolkit, ``[t]he purpose of 
these thresholds is not to provide a rigid screen to separate 
competitively benign mergers from anticompetitive ones . . . [r]ather, 
they provide one way to identify some mergers unlikely to raise 
competitive concerns and some others for which it is particularly 
important to examine whether other competitive factors confirm, 
reinforce, or counteract the potentially harmful effects of increased 
concentration.'' \39\ Consistent with these principles, the United 
States considered the strength of WellCare, Aetna, and their 
competitors in all 34 PDP regions. The combined market share of Aetna's 
and WellCare's individual PDP businesses does not exceed 25 percent in 
any region. The United States determined that the combination of 
Aetna's and WellCare's PDP business was not likely to substantially 
lessen competition, in part due to the presence of other significant 
competitors--including CVS's SilverScript product--in every market.
---------------------------------------------------------------------------

    \39\ Id.
---------------------------------------------------------------------------

5. The licensing provisions related to the Aetna brand protect 
WellCare's ability to compete using the divested assets.

    Under Section IV.I. of the proposed Final Judgment, Aetna is 
required to license the Aetna brand to WellCare for use with the 
divested business only for 2019. For 2020, Section IV.J. of the 
proposed Final Judgment prohibits CVS from using the Aetna brand for 
the sale of individual PDPs. Misunderstanding these provisions, the 
joint comment from Consumer Action and U.S. PIRG raises concerns that 
WellCare's one-year license to the Aetna brand fails to create an 
incentive to properly invest in the Aetna brand name.\40\ The proposed 
Final Judgment, however, is not meant to give WellCare a long-term 
incentive to invest in the Aetna brand name. Rather, these provisions 
give WellCare a two-year opportunity to establish its relationship with 
the customers of the divested plans without a competing Aetna-branded 
individual PDP plan. Given that, as previously explained, the 
divestiture improves WellCare's established ability to compete for PDP 
customers, these provisions further enhance the effectiveness of the 
proposed Final Judgment.
---------------------------------------------------------------------------

    \40\ TC-023, TC-024; see also TC-003.
---------------------------------------------------------------------------

6. The sales price does not cast doubt on WellCare's intention to 
compete.

    Several commenters raise misplaced concerns related to the price 
paid by WellCare.\41\ For example, the joint comment from Consumer 
Action and U.S. PIRG estimates the divestiture purchase price to be $45 
per life and then claims--without evidence--that this ``seems like a 
very cheap price.'' \42\ In some cases, a low purchase price may raise 
concerns whether a proposed divestiture buyer will be a successful 
competitor.\43\ As described in the 2004 Policy Guide to Merger 
Remedies, ``the purchase price will not be approved if it clearly 
indicates that the purchaser is unable or unwilling to compete in the 
relevant market.'' \44\ The Policy Guide also states, however, that ``a 
successful divestiture does not depend on the price paid for the 
assets.'' \45\ Rather, a low price ``may simply mean the purchaser is 
getting a bargain'' and ``if the Division has other sufficient 
assurances that the proposed purchaser intends to compete in the 
relevant market, the Division will not require . . . [a certain] 
price.'' \46\
---------------------------------------------------------------------------

    \41\ TC-003, TC-023, TC-024, and TC-060.
    \42\ TC-023 at 5, TC-024 at 7.
    \43\ See, e.g., United States v. Aetna, Inc., 240 F. Supp. 3d 1, 
72 (D.D.C. 2017) (citing to an ``extremely low'' purchase price as 
evidence that the divestiture buyer was not likely to be able to 
replace the competition lost by the merger).
    \44\ Antitrust Division Policy Guide to Merger Remedies, October 
2004, at 33 available at https://www.justice.gov/sites/default/files/atr/legacy/2011/06/16/205108.pdf.
    \45\ Id.
    \46\ Id. at 34.

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[[Page 5474]]

    In this case, the Antitrust Division has those assurances. The 
United States thoroughly vetted WellCare, which has offered individual 
PDPs since the program's inception in 2006 and has recently experienced 
strong organic growth.\47\ The United States interviewed WellCare's 
executives, reviewed its business plans, and discussed WellCare with 
relevant third parties. Based on these efforts, the United States 
believes that WellCare will continue to compete in individual PDPs, a 
market it has participated in for over a decade. The commenters do not 
provide any evidence that their estimated purchase price undermines 
this conclusion.
---------------------------------------------------------------------------

    \47\ See CMS Monthly Enrollment by CPSC for January 2019, 
available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-Enrollment-by-Contract-Plan-State-County-Items/Monthly-Enrollment-by-CPSC-2019-01.html?DLPage=1&DLEntries=10&DLSort=1&DLSortDir=descending.
---------------------------------------------------------------------------

B. Comments Related to the Vertical Aspects of CVS's Acquisition of 
Aetna

    Asking the Court to go outside the permissible scope of review 
under the Tunney Act, commenters also raise vertical concerns about the 
merger combining CVS's pharmacy and PBM businesses with Aetna's health 
insurance businesses, alleging that the merger will enable CVS to use 
its assets to harm competitors. CVS can be viewed as competing at three 
different levels of the healthcare industry: (1) the sale of drugs 
through channels such as retail, mail order, and long-term care 
pharmacies; (2) the provision of PBM services that are offered to 
insurers, including the negotiation of rates with pharmaceutical 
manufacturers and the negotiation of coverage networks with pharmacies; 
and (3) the sale of various types of insurance, including individual 
PDPs. CVS competes at all three of these levels through its branded 
retail, long-term care, and other pharmacies; through its PBM, 
Caremark; and through SilverScript, its individual PDP. Aetna competes 
with SilverScript at the third level, and offers additional types of 
insurance, but does not offer stand-alone PBM services or own any 
retail pharmacies of its own.
    Recognizing that CVS and Aetna do not compete against each other 
either at the retail pharmacy level or the PBM level, commenters 
nonetheless raise two categories of vertical concerns relating to the 
merger: input foreclosure and customer foreclosure concerns, which are 
explained below. Commenters also raise vertical concerns about CVS's 
common ownership of its retail pharmacies and Caremark, its PBM, which 
CVS owned long before it sought to acquire Aetna and is unrelated to 
the current merger.
    The United States investigated the potential for vertical harms 
from the merger by obtaining and reviewing documents as well as 
interviewing industry participants. For the reasons outlined below, the 
United States concluded that vertical harms were unlikely to occur and 
did not allege any harm related to vertical concerns in its Complaint. 
The vertical concerns therefore are outside the scope of this Tunney 
Act proceeding. See United States' December 14, 2018 Response to Order 
to Show Cause, Dkt. #32, at 3-7. Responding to the AAI's comment that 
there are benefits to transparency, the United States nonetheless 
describes the commenters' concerns and responds below.

1. Input foreclosure is unlikely to occur and is beyond the scope of 
the Complaint.

    Although several comments raise the possibility that the merged 
firm will harm competition in the sale of health insurance by raising 
the cost of important services or products that CVS provides to 
insurers that compete with Aetna, which is known as input foreclosure, 
the United States considered this possibility and determined that input 
foreclosure is unlikely to be profitable for CVS. In particular, 
commenters argue that CVS will deny or restrict health insurance 
rivals' access to inputs at two different levels of the supply chain: 
First, commenters \48\ allege that the company will not make its 
pharmacies available to competing health plans or will otherwise 
disadvantage rival plans by raising pharmacy costs. Second, commenters 
\49\ allege that Caremark will not make its PBM services available to 
competing health plans or will raise the prices for its PBM services to 
rival plans.\50\ Neither is likely to occur.
---------------------------------------------------------------------------

    \48\ TC-001, TC-002, TC-003, TC-023, and TC-024; see also Amicus 
Brief from the AIDS Healthcare Foundation, Dkt. # 50-1.
    \49\ TC-001, TC-002, TC-003, TC-023, TC-024, TC-048, TC-054, and 
TC-057.
    \50\ Additionally, some commenters also allege that CVS is 
foreclosing 340B administrators from its retail pharmacies. See TC-
066, TC-068. 340B administrators offer services to assemble and 
administer pharmacy networks that provide rebates to qualified 
hospitals. CVS competes with these administrators through a 
subsidiary called Wellpartner. These commenters allege that CVS does 
not allow its pharmacies to participate in 340B networks unless 
Wellpartner is selected as the hospital's 340B administrator, which 
would be a form of input foreclosure. CVS's acquisition of Aetna 
does not relate to the 340B market or affect shares in that market. 
In part for this reason, the United States did not allege 
anticompetitive effects from the merger related to CVS or 
Wellpartner's practices, placing the concerns of these commenters 
outside of the Court's Tunney Act review. See Dkt. #32, at 3-7.
---------------------------------------------------------------------------

    As noted in a set of questions and answers issued on the same day 
the Complaint and proposed Final Judgment were filed, the United States 
carefully considered these issues as part of its investigation.\51\ The 
evidence showed that CVS is unlikely to be able to profitably raise its 
PBM or retail pharmacy costs post-merger. If CVS were to raise prices 
at any level of the supply chain, it would lose customers to competing 
PBMs or retail pharmacies, and the merged entity likely would not be 
able to offset these losses by capturing additional health insurance 
customers. For these reasons, the United States did not allege input 
foreclosure in its Complaint, making this issue beyond the scope of 
this Tunney Act proceeding.
---------------------------------------------------------------------------

    \51\ See ``United States v. CVS and Aetna Questions and Answers 
for the General Public,'' available at https://www.justice.gov/opa/press-release/file/1099806/download.
---------------------------------------------------------------------------

    Despite the evidence, the AMA also argues that the divestiture will 
fail because WellCare will be foreclosed from pharmacy and PBM 
services.\52\ In effect, this argument asserts that the input 
foreclosure described above will occur and will be directed at 
WellCare. As discussed above, the United States concluded that such 
foreclosure--whether directed at WellCare or any other insurer--is 
unlikely to occur. Furthermore, even before the divestiture, WellCare 
(and Aetna) competed successfully against CVS's SilverScript PDP 
business despite the vertical relationship between SilverScript and 
Caremark. With the divestiture, CVS's share of the individual PDP 
market will not grow, so the merger will not increase CVS's incentive 
or ability to foreclose its PDP rivals--including WellCare--from CVS 
pharmacies or Caremark.
---------------------------------------------------------------------------

    \52\ TC-003 at 12.
---------------------------------------------------------------------------

2. Customer foreclosure is unlikely to occur and is beyond the scope of 
the Complaint.

    Other comments allege that the merged firm would harm pharmacies by 
denying them access to Aetna members, even though the merger does not 
significantly increase CVS's incentive to engage in this behavior, 
which is known as ``customer foreclosure.'' \53\ Commenters--primarily 
independent pharmacies that compete with CVS--allege that Caremark 
favors CVS

[[Page 5475]]

pharmacies in its reimbursements.\54\ The commenters allege that this 
favoritism can be observed in Caremark programs such as mandatory mail 
order, which steers customers away from independent pharmacies.\55\ 
Commenters also allege that Caremark manipulates reimbursement to 
independent pharmacies, sometimes later offering to buy them and turn 
them into CVS stores,\56\ and that several states are investigating 
these practices.\57\ From these allegations, these commenters 
incorrectly conclude that CVS is likely to use Aetna to steer 
additional customers away from rival pharmacies, causing them harm.
---------------------------------------------------------------------------

    \53\ TC-002, TC-023, TC-024, TC-035, TC-048, TC-059, TC-060, TC-
070, TC-076, TC-078; see also Amicus Brief from the AIDS Healthcare 
Foundation, Dkt. # 50-1.
    \54\ TC-001, TC-002, TC-004 TC-012, TC-013, TC-016, TC-017, TC-
021, TC-023, TC-024, TC-027, TC-031, TC-032, TC-033, TC-034, TC-039, 
TC-043, TC-044, TC-045, TC-050, TC-059, TC-060, TC-065, TC-075, TC-
076, TC-080, TC-083, TC-085.
    \55\ TC-001, TC-002, TC-016, TC-020, TC-021, TC-027, TC-035, TC-
039, TC-045, TC-046, TC-054, TC-059, TC-061, TC-062, TC-074, TC-080, 
TC-081.
    \56\ TC-004, TC-013, TC-017, TC-023, TC-024, TC-025, TC-031, TC-
032, TC-033, TC-038, TC-039, TC-046, TC-061, TC-064, TC-074; see 
also Amicus Brief from the AIDS Healthcare Foundation, Dkt. # 50-1.
    \57\ TC-016, TC-031, TC-044, TC-054, TC-059, TC-060, TC-061, TC-
063, TC-064, TC-072, TC-078, TC-080, TC-081, TC-082, TC-083; see 
also Amicus Brief from the AIDS Healthcare Foundation, Dkt. # 50-1.
---------------------------------------------------------------------------

    The United States takes these allegations seriously and considered 
them during its investigation. Generally, the United States considers 
the merging companies' prior acts when evaluating the likely effects of 
a transaction, but mergers are illegal under the Clayton Act only if 
they will likely substantially lessen competition in a relevant 
market.\58\ Based on its investigation, the United States determined 
that CVS's acquisition of Aetna likely would not result in an 
anticompetitive customer foreclosure strategy, particularly given 
Aetna's small share in many commercial health insurance markets. The 
combination of Aetna's small share of retail pharmacy purchases in many 
areas, competition from rival insurers who would win additional sales 
if Aetna provided a less desirable pharmacy network, and other factors 
make it unlikely that this strategy would be profitable for CVS. 
Therefore, the United States did not allege customer foreclosure in its 
Complaint, placing this issue beyond the scope of this Tunney Act 
proceeding. See Dkt. #32, at 3-7. Consequently, these comments do not 
provide a basis for rejecting the proposed Final Judgment. See U.S. 
Airways, 38 F. Supp. 3d at 76 (`` `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. . . .' 
'') (quoting United States v. Graftech Int'l Ltd., No. 1:10-CV-02039-
RMC, 2011 WL 1566781, at *13 (D.D.C. Mar. 24, 2011)).
---------------------------------------------------------------------------

    \58\ See 15 U.S.C. Sec.  18.
---------------------------------------------------------------------------

3. Vertical concerns are not addressable under the Tunney Act's 
standard of review.

    Although their comments are outside the scope of the Court's Tunney 
Act review because the Complaint does not allege vertical harms, some 
commenters weighed in on the standard of review under the Tunney Act 
\59\ or commented that the Court may still consider vertical concerns 
if the Complaint is drafted so narrowly as to make a ``mockery of 
judicial power,'' an argument that is unsupported by the caselaw, as 
discussed above.\60\ Indeed, as the D.C. Circuit recognized in 
Microsoft, 56 F.3d at 1459, a district court may not evaluate the scope 
of the complaint during a Tunney Act review, even if the court believes 
that additional claims would have been justified. While a court is not 
obliged to accept a consent decree that ``makes a mockery of judicial 
power,'' id. at 1462, under Microsoft that standard applies to the 
consent decree--not the complaint--and subsequent cases suggesting 
otherwise are inconsistent with Microsoft.
---------------------------------------------------------------------------

    \59\ TC-001, TC-002, TC-003, TC-023, TC-024, TC-060; see also 
Amicus Brief from the AIDS Healthcare Foundation, Dkt. # 50-1.
    \60\ TC-001, TC-002, TC-023, TC-024, TC-059, and TC-060; see 
also Amicus Brief from the AIDS Healthcare Foundation, Dkt. # 50-1.
---------------------------------------------------------------------------

    In any event, neither the Complaint nor the proposed Final Judgment 
is drafted so narrowly as to make a mockery of judicial power. To the 
contrary, the Complaint is significant in scope: it challenges 
anticompetitive harm in 16 broad regions, encompassing 22 states, 
affecting millions of seniors. The proposed Final Judgment goes even 
further, addressing the anticompetitive harm with the nationwide 
divestiture of Aetna's entire individual PDP business.
    Furthermore, the fact that the divestiture represents a small 
fraction of the underlying $69 billion merger is not relevant to the 
public-interest determination and is not a basis for concluding that 
the proposed remedy makes a mockery of the judicial process, as some 
commenters suggest.\61\ Courts have routinely found proposed judgments 
to be in the public interest when the United States challenged only a 
small part of a large transaction,\62\ and settlements are often ideal 
in these situations because they allow parties to proceed with 
transactions that could otherwise benefit consumers. Because Aetna was 
the nation's third-largest health insurance company, it is not 
surprising that its individual PDP business, while substantial, 
represents only a small percentage of the company's total value. The 
United States made these arguments in more detail in its December 14, 
2018 Response to Order to Show Cause, see Dkt. #32, and incorporates 
that pleading herein by reference.
---------------------------------------------------------------------------

    \61\ TC-001; see also Amicus Brief from the AIDS Healthcare 
Foundation, Dkt. # 50-1.
    \62\ See United States v. Parker-Hannifin Corp. and CLARCOR 
Inc., 1:17-cv-01354 (D. Del. Sept. 26, 2017) (complaint alleging 
harm in only two product markets, which resulted in a divestiture of 
a business with annual revenues of approximately $60 million, in 
challenge to $4.3 billion transaction); United States v. United 
Technologies Corp. and Goodrich Corp., 1:12-cv-01230 (D.D.C. July 
26, 2012) (complaint alleging harm in only two product markets, 
resulting in a divestiture of businesses expected to generate 
approximately $395 million in annual revenues, in challenge to $18.4 
billion transaction); United States v. InBev N.V./S.A. et al., 1:08-
cv-01965 (D.D.C. Nov. 14, 2008) (complaint alleging harm in only 
three regions of upstate New York in challenge to InBev's proposed 
acquisition of Anheuser-Busch for approximately $52 billion).
---------------------------------------------------------------------------

C. Other Miscellaneous Comments

    Even though CVS and Aetna significantly compete against each other 
only in the sale of individual PDPs, several commenters raised 
irrelevant concerns related to other markets, including whether the 
merger will increase entry barriers in either the PBM or health 
insurance markets,\63\ or reduce PBM competition by eliminating Aetna 
as a potential entrant in the PBM market.\64\ During its investigation, 
the United States seriously considered whether the merger likely would 
harm competition in the PBM and health insurance markets, including by 
increasing entry barriers and eliminating Aetna as a PBM competitor. 
Among other things, the United States obtained and reviewed documents 
and interviewed industry participants about these issues. In reviewing 
such information, the United States determined that the evidence did 
not show that the merger likely would harm competition in these areas. 
Accordingly, the Complaint did not allege that CVS's acquisition of 
Aetna would harm competition in PBM and health insurance markets other 
than the sale of individual PDP plans. These comments are thus beyond 
the purview of the Tunney Act and do not provide a basis for rejecting 
the proposed Final Judgment. See U.S. Airways, 38 F. Supp. 3d at 76 
(``[T]he Court's role under the APPA is limited to reviewing the remedy 
in relationship to the violations

[[Page 5476]]

that the United States has alleged in its Complaint.'') (internal 
citation omitted).
---------------------------------------------------------------------------

    \63\ TC-002, TC-003.
    \64\ TC-001, TC-003; see also Amicus Brief from the AIDS 
Healthcare Foundation, Dkt. # 50-1.
---------------------------------------------------------------------------

    Although some commenters expressed concern about concentration in 
the PBM market, these concerns are misplaced because Aetna does not 
provide stand-alone PBM services. These commenters state that only 
three companies--Caremark, ESI, and Optum--control over 80% of the PBM 
marketplace \65\ and are simply too powerful,\66\ with the ability to 
harm pharmacies, including by forcing ``take it or leave it'' contracts 
on independent pharmacies. The commenters also complain about PBM 
business practices, such as ``spread pricing'' on pharmaceuticals, 
which the commenters allege limits transparency and harms independent 
pharmacies.\67\ Additionally, the AMA and other commenters raised 
concerns that the vertically integrated PBM/health insurers (Cigna-
Express Scripts, Optum Rx-United Healthcare, and CVS-Aetna) would have 
increased incentives following the merger to coordinate by bidding less 
aggressively for PBM contracts that would strengthen their health 
insurer rivals or that the large vertically integrated PBM/health 
insurers would have stronger incentives to prevent market entry by 
other PBMs or the introduction of innovative drug business models.\68\ 
The merger, however, does not significantly increase concentration in 
the PBM market because Aetna does not offer stand-alone PBM services. 
Also, these comments do not relate to whether the proposed Final 
Judgment reasonably addresses the harms alleged in the Complaint. 
Therefore, they are well beyond the scope of this Tunney Act proceeding 
and do not provide a basis for rejecting the proposed Final Judgment. 
See U.S. Airways, 38 F. Supp. 3d at 76 (``[T]he 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.'') 
(internal citation omitted).
---------------------------------------------------------------------------

    \65\ TC-002, TC-004, TC-009, TC-015, TC-020, TC-023, TC-024, TC-
026, TC-029, TC-038, TC-044, TC-046, TC-054, TC-056,TC-059, TC-060, 
TC-061, TC-080, TC-083; see also Amicus Brief from the AIDS 
Healthcare Foundation, Dkt. # 50-1.
    \66\ TC-014, TC-023, TC-024, TC-026, TC-027, TC-037, TC-044, TC-
046, TC-054, TC-056, TC-057, TC-059, TC-062.
    \67\ TC-009, TC-014, TC-015, TC-016, TC-017, TC-020, TC-021, TC-
023, TC-024, TC-025, TC-031, TC-033, TC-044, TC-045, TC-047, TC-056, 
TC-059, TC-060, TC-061, TC-062, TC-063, TC-064, TC-072, TC-074, TC-
078, TC-080, TC-081, TC-082, TC-085; see also Amicus Brief from the 
AIDS Healthcare Foundation, Dkt. # 50-1.
    \68\ TC-002, TC-003.
---------------------------------------------------------------------------

    Some commenters raised concerns about the effectiveness of 
firewalls at Caremark, despite CVS's commercial incentive to maintain 
those firewalls. The AAI expressed concerns that ineffective firewalls 
would allow Caremark to facilitate coordination among health insurers 
that use it as a PBM.\69\ The United States investigated this 
possibility and determined that CVS is commercially incentivized to 
maintain firewalls because that customers could switch to an 
alternative PBM if their information were not kept confidential. MSSNY 
raised a related concern regarding the potential for consumer data 
breaches due to data being shared between the merged entities, but CVS 
already handles sensitive consumer data from Caremark's PBM business. 
Nothing about the merger changes CVS's incentive or ability to protect 
this information.
---------------------------------------------------------------------------

    \69\ See also TC-045.
---------------------------------------------------------------------------

    Other commenters applied the wrong legal standard when they argued 
that the Court should reject the settlement because consumers may not 
benefit from the merger of CVS and Aetna. The AAI and the joint comment 
from Consumer Action and U.S. PIRG \70\ argue that there is little 
evidence that past vertical mergers have benefitted consumers, and 
several commenters \71\ suggested that there is no evidence that cost 
savings will be passed through to customers. Mergers, however, are 
illegal under the Clayton Act only if they substantially lessen 
competition in a relevant product market, not if they fail to pass on 
benefits to consumers in markets where competition likely will not be 
substantially lessened.\72\ Consequently, these comments do not provide 
a basis for rejecting the proposed Final Judgment.
---------------------------------------------------------------------------

    \70\ TC-002, TC-023, and TC-024.
    \71\ TC-003, TC-023, TC-024, TC-054, TC-059.
    \72\ See 15 U.S.C. Sec.  18.
---------------------------------------------------------------------------

    Some commenters raised other concerns that are beyond the scope of 
the Complaint in this case. For example, several commenters, including 
the MSSNY, said that the merger would harm physicians and other 
healthcare providers in a number of ways, including through steering 
patients away from physician groups or by imposing administrative 
burdens on physicians.\73\ They also argue that these actions would 
harm patients. Without relating their concerns to the merger, other 
commenters allege that the pharmacy \74\ or insurance \75\ markets are 
concentrated, raise concerns relating to CVS's existing pricing 
practices,\76\ note that CVS is involved in an ongoing federal 
whistleblower case,\77\ or complain about CVS's long-term care 
pharmacy.\78\ As these comments do not relate to whether the proposed 
Final Judgment reasonably addresses the harms alleged in the Complaint, 
they are well beyond the scope of this Tunney Act proceeding and do not 
provide a basis for rejecting the proposed Final Judgment. See U.S. 
Airways, 38 F. Supp. 3d at 76 (``[T]he 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.'') (internal citation 
omitted).
---------------------------------------------------------------------------

    \73\ TC-001, TC-004, TC-007, TC-011, TC-029, TC-048, TC-060, TC-
067, TC-070, TC-078, TC-081; see also Amicus Brief from the AIDS 
Healthcare Foundation, Dkt. # 50-1. MSSNY further argued that these 
practices would be driven by the $40 billion in debt that CVS is 
incurring as part of the transaction.
    \74\ TC-002.
    \75\ TC-002, TC-023, and TC-024.
    \76\ TC-009, TC-014, TC-015, TC-016, TC-017, TC-020, TC-021, TC-
023, TC-024, TC-025, TC-031, TC-033, TC-044, TC-045, TC-047, TC-056, 
TC-059, TC-060, TC-061, TC-062, TC-063, TC-064, TC-072, TC-074, TC-
078, TC-080, TC-081, TC-082, TC-085; see also Amicus Brief from the 
AIDS Healthcare Foundation, Dkt. # 50-1.
    \77\ TC-007.
    \78\ TC-065.
---------------------------------------------------------------------------

D. Comments in Support of the Merger

    Twenty-six commenters expressed support for the merger or praised 
CVS's business practices.\79\ Commenters, including the California 
Asian Pacific Chamber of Commerce, Connecticut Business and Industry 
Association, Atlanta Children's Shelter, SISU Integrated Early Leaning, 
and API Council, discussed the merger's potential to create an 
innovative platform that will improve access to high quality and 
affordable healthcare. In particular, the Asian Business Association 
and the API Council discussed the potential of the merger to allow for 
more collaboration between doctors, pharmacists, and insurers, 
resulting in improved patient care. Commenters, including the Spanish 
Speaking Elderly Council-RAICES, Inc., the Latino Commission on AIDS, 
National Hispanic Medical Association, and the National Black Nurses 
Association, praised CVS for improving public health through removing 
tobacco from its stores, participating in programs to combat the opioid 
epidemic, and offering free biometric health screenings. Other 
commenters such as the Connecticut Business and Industry Association 
and ValueCare Alliance praised Aetna for providing jobs and 
collaborating with providers on

[[Page 5477]]

innovative healthcare products. These comments are consistent with the 
United States' previous recognition that this merger has the potential 
to generate benefits by improving the quality and lowering the costs of 
healthcare services.\80\
---------------------------------------------------------------------------

    \79\ TC-005, TC-006, TC-008, TC-010, TC-018, TC-019, TC-022, TC-
028, TC-030, TC-036, TC-040, TC-041, TC-042, TC-049, TC-051, TC-052, 
TC-053, TC-055, TC-058, TC-069, TC-071, TC-073, TC-074, TC-077, TC-
079, TC-084.
    \80\ See ``Justice Department Requires CVS and Aetna to Divest 
Aetna's Medicare Individual Part D Prescription Drug Plan Business 
to Proceed with Merger,'' available at https://www.justice.gov/opa/pr/justice-department-requires-cvs-and-aetna-divest-aetna-s-medicare-individual-part-d.
---------------------------------------------------------------------------

VI. Conclusion

    After careful consideration of the public comments, the United 
States continues to believe that the proposed Final Judgment, as 
drafted, provides an effective and appropriate remedy for the antitrust 
violations alleged in the Complaint, and is therefore in the public 
interest. The United States will move this Court to enter the proposed 
Final Judgment after the comments and this response are published as 
required by 15 U.S.C. Sec.  16(d).

Dated: February 13, 2019

Respectfully submitted,

Jay D. Owen,
Shobitha Bhat,
Natalie R. Melada,

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].

[FR Doc. 2019-02846 Filed 2-20-19; 8:45 am]
BILLING CODE 4410-11-P