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American Antitrust Institute Asks FTC To "Proceed Forcefully" Against CVS Caremark

Posted  December 2, 2010

As CVS Caremark is learning, even an approved merger does not protect a company from later being accused of anti-competitive behavior as a result of the merger.  As we wrote in an earlier post, the Federal Trade Commission began investigating CVS Caremark Corp., which has been accused of anti-competitive practices, in spite of the fact that the FTC approved its merger several years ago.  The 2007 merger—worth $27 billion—combined CVS, a drugstore chain, and Caremark, a pharmacy benefits manager, and proceeded with the FTC’s blessing after a review under Hart-Scott-Rodino Antitrust Improvements Act.

Although the FTC has already confirmed that it is conducting an investigation—and in June FTC Chairman Jon Leibowitz confirmed that he had met with CVS Caremark officials and that the agency was in the process of receiving documents from them—the American Antitrust Institute is urging the FTC to aggressively pursue the possible antitrust violations at CVS Caremark.

The AAI claims that CVS Caremark is engaging in anti-competitive practices designed to force consumers to use CVS pharmacies.  According to Albert Foer, the AAI president, “evidence that this conduct is now occurring would clearly establish that the merger did in fact enable and incent the combined firm to engage in this conduct.”  The AAI claims that this conduct includes misusing information from the Caremark side of the business, including private patient information, to force consumers to use CVS over rival pharmacies.  In addition, the AAI claims that CVS Caremark is using its “maintenance choice” program to force consumers to use CVS.  The “maintenance choice” program allows consumers to only get prescriptions by mail or at CVS, and the company has been accused of enrolling consumers without their permission.

The AAI is not the only entity urging the FTC to take another close look at the CVS Caremark merger.  Eight members of Congress (four Democrats and four Republicans), asked the FTC to do exactly that in a September 2009 letter.  Should the FTC heed the congressmen and the AAI, a possible outcome could be divestiture.

Tagged in: Antitrust Enforcement, Antitrust Policy,