Mar 22, 2023
Elizabeth Warren Wants FTC to Crack Down on Health-Care Mergers
(Bloomberg) -- US Senator Elizabeth Warren increased pressure on regulators to scrutinize CVS Health Corp.’s $9.5 billion deal to buy Oak Street Health Inc., as part of a broad critique of vertical consolidation in the industry that she says could increase costs and reduce quality.
The Federal Trade Commission should not only review the CVS acquisition for impacts on competition and care quality, but also revisit previous transactions in the sector, the Massachusetts Democrat said in a letter addressed to commissioners on March 17 that was provided by her office.
Pressure from Warren, a longtime critic of consolidation, could help sway the commission toward issuing a second request for information from CVS and Oak Street. That would signal a closer examination of the deal before deciding whether to challenge it in court.
The largest US health-care companies have been combining insurance businesses with medical clinics, pharmacy benefits managers, pharmacies and other assets to assemble vertically integrated businesses that run health plans and deliver care. CVS’s purchase of Oak Street, a chain of clinics for seniors on private Medicare Advantage plans, is part of the company’s strategy to expand its primary care footprint five years after combining with insurer Aetna.
Representatives for CVS, Oak Street and the FTC didn’t immediately respond to requests for comment.
Companies often frame the deals as ways to give insurers that pay for care more levers to improve quality and eliminate wasteful spending. CVS and Oak Street said their tie-up would “significantly benefit patients’ long-term health by reducing care costs and improving outcomes,” in the news release announcing the deal last month.
Warren warned that consolidation may not lead to promised benefits.
“The acquisition of thousands of independent providers by a few massive health-care mega-conglomerates could reduce competition on a local or national basis, hurting patients and increasing health-care costs,” she wrote.
Warren cited research on other forms of vertical integration, including between hospitals and doctors, as driving higher costs by influencing where they refer patients for labs, imaging and other services. She asked the regulator to revisit earlier acquisitions of primary care and home-health businesses by UnitedHealth Group Inc., Humana Inc., Walgreens Boots Alliance Inc., Walmart Inc. and Amazon.com Inc.
Oak Street shares fell less than 1% to $35.46 at 9:55 a.m. in New York, below CVS’s $39-per-share offer price. The companies said the deal is expected to close this year.
--With assistance from Leah Nylen.
(Updates with stock trading in final paragraph.)
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