N.Y. approval clears the way for $69 billion CVS acquisition of Aetna

Nov. 26--CVS Health Corp. has agreed to spend $40 million for health insurance education and other conditions to win approval from New York regulators, clearing the way for its acquisition of Aetna Inc., state officials announced Monday.

CVS announced it expects to close on the $69 billion deal by Wednesday.

Shares of CVS jumped 3.5 percent, closing at $77.84. Aetna ended the day at $210.10, up 2.3 percent.

Maria Vullo, New York state's superintendent of financial services, insisted that claims of cost savings be specified by CVS and Aetna. She also said she's concerned that pharmacy benefit managers "are just another cog in the wheel for profit-making -- to consumers' detriment."

And Vullo said CVS must comply with New York's cybersecurity regulations to ensure the privacy of consumer data.

New York was among the last few states to give its blessing to the CVS-Aetna tie-up. As it sought permission for its deal with Aetna, CVS approached regulators in 28 states, signing smaller financial agreements with several.

Connecticut in October approved the CVS acquisition of Aetna, contingent on the companies divesting Medicare prescription drug businesses to assure competition.

More significantly, CVS promised to keep Aetna in Hartford for at least 10 years and to leave the number of employees at Aetna and its Connecticut subsidiaries at about 5,300 for at least four years.

The New York Department of Financial Services approved the acquisition subject to conditions that include "enhanced consumer and health insurance rate protections," privacy controls, cybersecurity compliance and the $40 million commitment to support health insurance education and enrollment.

Vullo detailed numerous other stipulations agreed to by CVS. For example, no money from any Aetna company or affiliate covering New Yorkers may be used to pay for the CVS acquisition and costs from the acquisition, including executive compensation, may not be passed on to any domestic or foreign Aetna New York insurer.

In addition, CVS may not seek higher health insurance rates in New York to pay for the cost of the acquisition and premiums and cost-sharing owed by policyholders may not increase. And dividends may not be paid by Aetna without approval of the state financial services superintendent for three years.

The California Department of Managed Health Care last week approved the CVS-Aetna deal. CVS agreed to pay $166 million to support the state's health care system and employment, including building and improving facilities in California and supporting jobs in Fresno and Walnut Creek.

CVS also agreed to pay $22.8 million to increase the number of health care providers in underrepresented California communities by funding scholarships and loan repayment programs.

And it will spend $22.5 million to support joint ventures and other ways to promote health care in California.

Aetna and CVS announced the deal in December 2017. The two companies say the merger will reduce costs by streamlining the health care business, making it more efficient.

Critics, including independent pharmacies, say the deal will result in a monopoly.

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