The healthcare industry has been buzzing with rumors surrounding CVS Health’s possible purchase of Aetna. Here are some of the questions people are asking:
1) Why would CVS Health and Aetna want to become one company?
Aetna has about 45 million policyholders. If CVS could “steer” those policyholders to their retail outlets, it would have a positive impact on store foot traffic in general; and would likely drive activity in their Minute Clinic business as well as their retail pharmacy business. Aetna CEO Mark Bertoloni has discussed the company’s possible future as a health delivery company, becoming “…the front door of the healthcare system.” In that role, he said, “we should have an attitude that when somebody has to go to an emergency room or they have to go in the hospital or they need to see a specialist, we have failed them in some way.” Brian Tranquilut, a stock analyst at the investment banking firm Jeffries said “the strategic value that (the deal) brings is in the sense that health care has changed so much – that all these insurance companies need or want to be as close to the patient and beneficiary or plan members as possible.” The deal seems like a turnkey way for Aetna to get closer to the patient.
Then there’s the “AMAZON FACTOR.” Analysts suggest that Amazon will likely enter the pharmacy business at some point. That element of new competition would be extremely disruptive to traditional retail pharmacy businesses like CVS. The threat of new competition might be driving this deal – necessity is the mother of invention, right?
2) How would consumers be impacted?
I stumbled upon a 10/31 LA Times article by David Lazarus with the headline: CVS-Aetna deal could have the same result as telecom mergers – higher prices. “In 1995, the average cable bill was just over $22 a month. Now it’s more than $100.” The article suggests that big mergers generally are not good for consumers.
Conversely, the possibility of creating new and efficient care delivery for basic healthcare needs via a vast network of retail outlets with retail hours rather than typical doctors’ office hours seems like it could be exciting, convenient and maybe even cost-reducing.
3) What are the hurdles to “the deal”?
In addition to the “duh” answer – antitrust scrutiny, there’s another lurking issue. In a 10/27 Forbes article “Why CVS Won’t Buy Aetna,” Bruce Japsen writes “…a full-blown merger of the healthcare giants would be complicated and unlikely… given that the drugstore chain is already going into business with an Aetna rival, Anthem. Anthem just last week said it was forming its own pharmacy benefit management company, IngenioRx, with CVS, which operates a PBM. That was seen as a way to compete with the nation’s largest health insurer, UnitedHealth Group, which owns the PBM OptumRx.” The article goes on to say that the purpose of the Anthem / CVS Health IngenioRx deal is to “…combine its member and provider engagement initiatives and market-leading pricing with CVS’ point-of-sale engagement, such as member messaging and Minute Clinic.” It seems as if CVS would need to bail on the IngenioRx initiative in order to advance sincere discussions with Aetna.
If things move forward between CVS and Aetna, CPI-HR will keep you posted regarding any potential impact on you or your company.