# CVS Corporation; Revco D.S., Inc.; Analysis To Aid Public Comment > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A97-14745 ## Record - **Collection:** Federal Register - **Document type:** Notice - **Published:** June 6, 1997 - **Citation:** 62 FR 31103 ## Text FEDERAL TRADE COMMISSION [File No. 971-0060] CVS Corporation; Revco D.S., Inc.; Analysis To Aid Public Comment AGENCY: Federal Trade Commission. ACTION: Proposed consent agreement. ----------------------------------------------------------------------- SUMMARY: The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the draft complaint that accompanies the consent agreement and the terms of the consent order--embodied in the consent agreement--that would settle these allegations. DATES: Comments must be received on or before August 5, 1997. ADDRESSES: Comments should be directed to: FTC/Office of the Secretary of the Secretary, Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580. FOR FURTHER INFORMATION CONTACT: William J. Baer, Federal Trade Commission, H-374, 6th and Pennsylvania Ave, NW., Washington, DC 20580. (202) 326-2932. George S. Cary, Federal Trade Commission, H-374, 6th and Pennsylvania Ave, NW, Washington, DC 20580. (202) 326-3741. SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of the Commission's Rules of Practice (16 CFR 2.34), notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of sixty (60) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the accompanying complaint. An electronic copy of the full text of the consent agreement package can be obtained from the Commission Actions section of the FTC Home Page (for May 29, 1997), on the World Wide Web, at ``http://www.ftc.gov/os/actions/htm.'' A paper copy can be obtained from the FTC Public Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580, either in person or by calling (202) 326-3627. Public comment is invited. Such comments or views will be considered by the Commission and will be available for inspection and copying at its principal office in accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)). Analysis of Proposed Consent Order To Aid Public Comment The Federal Trade Commission (``Commission'') has accepted, subject to final approval, an agreement containing a proposed Consent Order from CVS Corporation and Revco D.S. Inc. (collectively, ``the respondents'') under which the respondents would be required to divest a total of 114 Revco retail drug stores in the state of Virginia to Eckerd Corporation, a subsidiary of J.C. Penney Company, or to another Commission-approved purchaser, and certain pharmacy assets related to six Revco retail drug stores in the Binghamton, New York metropolitan area to Medicine Shoppe, a subsidiary of Cardinal Health, or another Commission-approved purchaser. The agreement is designed to remedy the anticompetitive effects resulting from CVS's proposed acquisition of Revco. The proposed Consent Order has been placed on the public record for sixty days for reception of comments by interested persons. Public comment is invited regarding all aspects of the agreement including the proposed divestitures to Eckerd Corporation and Medicine Shoppe. Comments received during this period will become part of the public record. After sixty days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement or make final the agreement's proposed Order. The proposed complaint alleges that the proposed acquisition, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. Sec. 45, in the market for the retail sale of pharmacy services to third-party payors in the State of Virginia and the Binghamton, New York, metropolitan area. The retail sale of pharmacy services to third-party payors refers to prescription drugs sold by retail outlets such as drug store chains, independent drug stores, food stores and mass merchandise stores to third-party payors, which include insurance carriers, health maintenance organizations, preferred provider [[Page 31104]] organizations, and corporate employers. Third-party payors provide retail pharmacy service benefits to their beneficiaries, typically through intermediaries known as pharmacy benefit management (``PBM'') firms that create and administer retail pharmacy networks on behalf of third-party payors, whereby third-party payor beneficiaries may go to any pharmacy participating in the network to have prescriptions filled. In establishing these pharmacy networks, third-party payors generally rely on competition among large pharmacy chains to keep the cost of pharmacy services competitive. In markets where only a small number of pharmacy chains compete, third-party payors may pay higher rates for pharmacy services. Where a single pharmacy chain controls a large share of pharmacy locations in a given area, the chain is able to extract higher prices. For purposes of assessing competitive harm in the market for the retail sale of pharmacy services to third-party payors, both states and metropolitan statistical areas may be appropriate geographic areas. Many third-party payors require coverage for their beneficiaries throughout a state or just in certain metropolitan areas where the majority of their beneficiaries reside. While the geographic areas in which to assess the potential competitive harm of a proposed acquisition depend on where particular third-party payors' beneficiaries reside, states and MSAs are close proxies for such plan- by-plan analysis. CVS's proposed acquisition of Revco will give the combined entity a dominant position both in the state of Virginia and in the Binghamton, New York, metropolitan area. As a result, the complaint alleges that third-party payors would be unable cost-effectively to assemble pharmacy networks that did not include CVS or Revco stores, and therefore, CVS would be able to increase prices for the retail sale of pharmacy services to third-party payors. The complaint also alleges that timely entry in the market for the retail sale of pharmacy services to third-party payors in these geographic markets on the scale necessary to offset the competitive harm resulting from the combination of CVS and Revco is unlikely. The proposed Consent Order would remedy the alleged violations by requiring divestitures to restore the lost competition that would result from the acquisitions. Under the proposed Consent Order, the respondents would be required to divest 114 Revco drug stores in Virginia to Eckerd or to a Commission-approved purchaser. The proposed Consent Order also requires the respondents to divest either specific pharmacy assets related to six Revco drug stores in the Binghamton, New York, metropolitan area to Medicine Shoppe International, Inc., or its subsidiary, Pharmacy Operations, Inc., or, six Revco drug stores in the Binghamton, New York, area to a Commission-approved purchaser. The respondents have ten days from the date the Order becomes final or four months after the Commission accepts the Agreement Containing Consent Order for public comment, whichever is later, to accomplish each divestiture to the named purchaser. Alternatively, if the respondents do not divest to Eckerd or Medicine Shoppe, they must divest to alternative Commission-approved buyers three months from the date the Order becomes final. The proposed Order requires that the assets being divested in Virginia and Binghamton, New York, each go to a single purchaser in order to ensure competition by recreating a chain of sufficient size and coverage to serve as an alternative anchor pharmacy chain for a PBM retail pharmacy network. Under the proposed Order, if either divestiture is not accomplished within the required time period, then the Commission may appoint a trustee to divest all 234 Revco drug stores in Virginia and the eleven CVS drug stores in the Binghamton, New York, metropolitan area, whichever applies. These ``crown jewel'' provisions in the proposed Order help ensure that a trustee would be able to accomplish each divestiture. The Order also contains an Asset Maintenance Agreement that requires CVS, pending divestiture, to maintain the Revco stores and assets relating to the Revco stores in the same condition and in the same business as they have been operating prior to the acquisition. Under the proposed Order, the respondents must submit an initial report on compliance with the terms of the Asset Maintenance Agreement and on how they intend to comply with the divestiture provisions of the proposed Order. In addition, the respondents must provide the Commission with a report of compliance with the divestiture provisions of the Order within thirty days following the date this Order becomes final, and every thirty days thereafter until CVS and Revco have fully complied with the divestiture provisions of the proposed Order. The purpose of this analysis is to facilitate public comment on the proposed Order, and it is not intended to constitute an official interpretation of the agreement and proposed Order or to modify in any way their terms. Donald S. Clark, Secretary. [FR Doc. 97-14745 Filed 6-5-97; 8:45 am] BILLING CODE 6750-01-M --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A97-14745. Public record. Not legal advice.