This past weekend, CVS announced its $69 billion deal to buy Aetna. This may be one of the biggest M&A transactions of the year. The big wig executives of Aetna would stay on at the merged company and Aetna will operate as an separate business unit under CVS Health. This would mean 10,000 CVS stores along with 22 million health insurance customers coming together. CVS is gearing up – they recently hired a senior exec from a startup who specializes in primary care clinics.
What will this merge look like?
There are a ton of benefits that would come from this combined company. Aetna would become a subsidiary within CVS. It would allow companies to really create a new model of healthcare. Patients would have access to information and resources needed to be in charge of their own care at retail clinics at a lower price. Ultimately, this deal would mean $750 million in cost savings over two years. These savings would result in lower premiums and overall better quality services.
“Our acquisition of Aetna does not further concentrate the healthcare sector. Instead it reconfigures it to bring together disparate parts of the healthcare system that today lead to inefficient, ineffective and more costly care.” Thomas Moriarty
The pharmacists at CVS would be able to help with routine doctor appointments, keep patients healthy and prevent illness. They also would be able to refer CVS Minute Clinic patients to primary care doctors. Personalized counseling would be provided and digital tools would also be used to truly make the patient experience easier.
What issues will be presented with this merge?
Antitrust laws are going to be the largest problem with this deal. The AAI (American Antitrust Institute) warned us that the proposed deal would actually violate consumer protections and hurt competitors. AAI thinks this merge is going to exclude competitors from the market. It makes sense considering CVS Health is the largest US pharmacy/retailer and Aetna is the third largest US payer.
“Assuming [the merger] moves forward, the three largest integrated PBM-insurer systems (i.e., CVS-Aetna, Express Scripts-Cigna, and Optum Rx-United Healthcare) that would dominate the markets would have weak, if any, incentives to compete.” AAI
The possible streamlining of distribution and production of health plans and pharmacy benefits is definitely getting people worried.
Would this merge really lower costs and change care settings? If the deal does goes through, we should expect to see this happen during the second half of 2018. Stay tuned.
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