Aetna Inc. said Thursday it agreed to sell its Medicare Part D prescription business to a WellCare Health Plans Inc. subsidiary, as the company waits for its merger with CVS Health Corp. to be approved by federal and state officials.
The deal with the WellCare subsidiary will be effective at the end of this year, Aetna said in a regulatory filing, adding that “the purchase price is not material.”
The announcement marks a major step forward for CVS’s planned acquisition of Aetna, a nearly $70 billion deal that will unite the third-biggest health insurer with the drugstore and pharmacy-benefit company.
The Wall Street Journal previously reported that Justice Department antitrust enforcers were preparing to give the green light to the deal, and that WellCare was in talks to acquire Medicare drug plan assets from the merger partners.
The closing of the divestiture is dependent on the closing of the CVS-Aetna deal.
CVS said in a Securities and Exchange Commission filing Thursday that it still expects its deal with Aetna to close in the earlier part of the fourth quarter.
The Justice Department antitrust officials already gave a nod to Cigna Corp.’s acquisition of Express Scripts Holding Co. , which also brings together a major health insurer with a pharmacy-benefit manager.
In the case of the CVS-Aetna deal, the two companies operate in largely different businesses, with their most direct overlap coming in selling the Medicare prescription-drug program, known as Part D.
CVS has the largest market share in the Medicare drug-plan business, with around 6.1 million members, according to a recent tally from Wells Fargo . Aetna is the fifth-biggest Part D seller, with around 2.2 million members, according to Wells Fargo.
To preserve competition where CVS and Aetna sell Part D plans head-to-head, the Justice Department had been expected to require the companies to sell off parts of their Part D business to one or more companies that would compete with the newly merged firm.
WellCare, based in Tampa, is a growing managed-care operator focused on both Medicare and Medicaid coverage that has already been expanding its footprint with acquisitions. WellCare already had around 1.1 million Part D enrollees.
The CVS deal also needs approvals from some state officials. During CVS’s second-quarter earnings call, Chief Executive Larry Merlo said that “a substantial number of states have approved” the deal and that CVS expected “a number of approvals will occur shortly after receipt of DOJ approval.”