On Sunday, CVS Health announced its plans to buy health insurance giant Aetna in a $69 billion deal. Each company’s board of directors fully supported the move.
CVS Health (CVS) is a leading pharmacy benefits manager that serves approximately 90 million plan members. Aetna, a health care benefits company, serves roughly 44.6 million individuals as of September 30, 2017. Together, the two would create a powerful team in the health care industry.
The Benefits of a CVS-Aetna Merger
A CVS-Aetna merger could set the stage for more consumer-focused care.
According to CVS Health, the merger “fills an unmet need in the current health care system and presents a unique opportunity to redefine access to high-quality care in lower cost, local settings whether in the community, at home, or through digital tools.” They believe the deal will offer shoppers a uniquely integrated, community-based health care experience; more integrated data and analytics; as well the chance to better fight chronic diseases.
Both companies have indicated that they could revamp CVS’ pharmacy and clinic locations into community-based sites that could save individuals seeking health care money.
The Potential Downside of the Deal
It’s possible that consumers who do business with either company could find their hands somewhat tied down the line.
Opponents are concerned individuals might be limited in where they can get their prescription medications or receive care in the future.
The Why Behind the Buy
News of CVS merging with Aetna comes during a time of transition in the health care industry. Early Saturday morning, the Senate passed their version of the GOP’s tax reform bill, which will eliminate the individual mandate in the Affordable Care Act. The future of the ACA itself still remains uncertain.
So, why have CVS and Aetna decided to combine? It’s likely the deal is in response to Amazon’s encroachment upon the health care and pharmacy retail space, as well as an attempt compete with UnitedHealth Group’s 2015 acquisition of Catamaran. Catamaran, a pharmacy benefit management company, was folded into the OptumRx division of UnitedHealth Group.
The CVS-Aetna merger is the inverse of the OptumRx and Catamaran merger, since CVS Health acquired Caremark (originally forming CVS Caremark Corporation and subsequently renamed CVS Health). The primary difference between the two deals is the retail component of CVS. The company has over 9,700 retail locations including 1,100 “Minute Clinics,” which provide routine and preventative health services.
CVS and Aetna have had a business partnership that goes back seven years. Both companies seem to expect that the deal will close; however, analysts believe it might be blocked on the grounds of reducing competition, particularly within the Medicare market.