CVS gets go-ahead to buy rival's Medicare prescription drug unit

WASHINGTON (Reuters)—Drugstore chain CVS Caremark has received antitrust approval to close on its deal to buy Universal American’s Medicare prescription drug business, the Federal Trade Commission said Tuesday.

CVS Caremark said late last year that it had agreed to buy the business for about $1.25 billion to expand in a growing segment of the pharmacy benefit market.

The deal will more than double the size of CVS Caremark’s business that provides prescription drug coverage under the Medicare Part D program. Medicare is the U.S. government's healthcare program for the elderly.

The go-ahead was announced in a list of approved deals that the agency puts out several times a week.

The acquisition will make CVS a more formidable competitor to health insurers such as UnitedHealth Group Inc and Humana Inc, both major participants in the Medicare business.

Universal American serves about 1.9 million Medicare prescription drug plan members, while CVS Caremark serves about 1.2 million Medicare drug plan members.

CVS has had a rocky history with its pharmacy benefits management business after buying Caremark for $27 billion in 2007. Caremark administers prescription drug benefits for employers and health plans and operates a large mail-order pharmacy operation.

Late in 2009, the PBM lost $4.8 billion in contracts heading into the new year, and the president of the unit left. At the same time, CVS disclosed that the Federal Trade Commission was investigating some business practices of the combined company, leaving questions about whether the merger made sense.

The remaining business at Universal American will mostly be in Medicare Advantage, the full-service health plans run by insurance companies under Medicare.