Judge Richard Leon of theU.S. District Court for the District of Columbia. (Photo: Diego M.Radzinschi/The National Law Journal)
A federal judge agreed Monday to appoint an outside lawyer tomonitor CVS Health Corp.'s acquisition of Aetna Inc. but raisedcontinued concerns about the two companies integratingtheir businesses while the $69 billion deal remains under his review.
|U.S. District Judge Richard Leon in Washington, D.C., suggestedCVS's management should be insulated from Aetna's while he weighsapproving the companies' settlement with the Justice Department,which cleared the acquisition on the condition the insurance giant sell offits independent prescription drug plan business.
|Related: To compete with Amazon, CVS dips a toe into theonline retail business
|Leon said it would be “more than reasonable” for CVS and Aetnato keep their businesses separate while he reviews the acquisition.The two companies announced the completion of their deal lastweek.
|The judge last week shared his concerns about the merger afterinitially declining to rule on the Justice Department's request tohave Julie Myers Wood, chief executive of the monitoring firmGuidepost Solutions, oversee the sale of Aetna's individualprescription drug plan business to Wellcare Health Plans Inc. Leonon Monday approved Wood as the monitor and spoke for only a fewminutes before setting a hearing for Dec. 18.
|“See you on the 18th,” he said, before stepping off the benchwithout questioning the Justice Department lawyers and counsel forAetna and CVS.
|Makan Delrahim, the assistant attorney general in charge of theJustice Department's antitrust division, attended Monday's hearing.Delrahim declined to comment after it. CNN reported last week thatDelrahim is among the contenders for theU.S. attorney general nomination.
|At last week's hearing, which many had expected to be routine,Leon said he had been struck by the government's request to appointa compliance monitor, saying that it made him feel as though hewere “being kept in the dark, kind of like a mushroom.”
|Leon, who approved AT&T's contestedacquisition of Time Warner in June, pointed out that those twocompanies have closed their deal but refrained from integratingtheir operations while the Justice Department challenges his rulingin the U.S. Court of Appeals for the D.C. Circuit.
|When Leon asked Justice Department lawyer Jay Owen last weekwhether he was familiar with that arrangement in the AT&T case,Owen replied, “No, your honor, I'm not.”
|“You need to talk to your colleagues more frequently, Mr. Owen.CVS and Aetna know. The deal closed pending my ruling, but theparties agreed that the companies wouldn't be integrated untilafter the appeal was resolved by the D.C. CIrcuit,” Leon said,referring to AT&T and TIme Warner. “[Aetna and CVS] know that,and I can't believe you don't.
|“What are you, a mushroom yourself over in the antitrustdivision?” Leon asked during one exchange.
|Leon accused the Justice Department and the two companies oftreating his review of the acquisition as a “rubber stampoperation,” raising the specter that he would strike down the dealon antitrust grounds. Appearing irate at times, he noted the publiccomment period on the deal had not yet closed, pointed specificallyto the American Medical Association's opposition to theacquisition, and expressed concern about how CVS and Aetna would beunwound in the event that he ruled against their merger.
|“Let's make it clear, Mr. Owen: This court's not a rubberstamp,” Leon said.
|“No, your honor, I don't believe this court is a rubber stamp,”Owen responded.
|“Yeah, I understand you don't,” Leon replied. “God knows if theantitrust division has learned anything, they know that this courtis not a rubber stamp. But these folks over here need to understandthat too, because it's their clients who think I am a rubber stamp,and that's not going to be tolerated.”
|Ahead of Monday's hearing, the Justice Department defended CVS and Aetna's moveto begin integrating their operations and said an earlierorder—signed by Leon in October—had allowed the companies toconsummate their merger.
|Government lawyers argued that while federal law gives judgespower to review merger settlements, it does not “prohibit companiesfrom consummating their merger” and integrating operations while acourt review is pending.
|“Allowing companies to consummate a proposed merger before asettlement has received final approval is common in consent decreeswith the United States and the Federal Trade Commission,” JusticeDepartment lawyers wrote in a court filing Sunday.
|The government said it was “particularly critical” for Aetna tocomplete the sale of its prescription drug plan business toWellcare.
|Insurers, the Justice Department said, “have already begunplanning their bids for the 2020 plan year, so transferring theassets to WellCare as soon as possible was necessary to ensure thatit could step into Aetna's shoes and preserve the competition thatwould otherwise be lost as a result of the merger.”
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