CVS and Aetna’s game-changing merger gains crucial approval
A landmark health care merger is inches away from the finish line. CVS has gained the US government’s approval to buy Aetna.
The $69 billion acquisition, announced in December 2017, will drastically remap the health care industry. CVS (CVS) is a massive drugstore chain and prescription insurer, and Aetna (AET) is one of the nation’s largest health insurers.
To gain the Trump administration’s approval, Aetna agreed to spin off its Medicare Part D prescription drug business. The Justice Department settled with CVS and Aetna on Wednesday. Pending a judge’s approval of the settlement, the deal will be completed.
The deal was expected to gain antitrust approval. CVS dominates the pharmacy business, but it accepts insurance from Express Scripts and other rivals, not just the CVS-owned Caremark plan. Aetna and CVS’ businesses won’t compete at all after Aetna divests its Medicare business.
CVS already serves as the pharmacy benefits manager for Aetna customers, so CVS won’t be adding any share of the market by buying the insurer. One big caveat: The companies negotiate those agreements every few years, so CVS wouldn’t have to worry about losing Aetna to a rival one day.
Antitrust regulators believe people could benefit from the combined powers of the two companies. The merger could lower American’s health care costs and improve the quality of care patients receive, Assistant Attorney General Makan Delrahim said in a statement.
Buying Aetna puts CVS in a better position to compete with other integrated health care providers, such as UnitedHealthcare (UNH) and pharmacy benefits manager Optum. PBMs like Optum and CVS’s Caremark help manage prescription drug plans for commercial health insurers.
It also helps the companies fend off Amazon (AMZN), which looms large in the health care market even though it hasn’t made a major entry yet. Amazon sells its own line of over-the-counter drugs online, and it recently bought online prescription delivery business PillPack. But Amazon does not sell insurance or clinical appointments. Not yet, anyway.
What it means for consumers
CVS has more than 9,700 pharmacies and 1,100 Minute Clinics. The combination could make it easier for people to monitor diseases without having to see a doctor.
The combined company envisions transforming CVS; walk-in clinics into something like the medical version of the Genius Bar at Apple Stores. Experts will dispense quick, convenient and reliable health care knowledge, Aetna and CVS have said.
Currently, CVS’ walk-in locations offer vaccinations, lab tests and diagnosis and treatment of illnesses like strep throat and ear infections from nurse practitioners and physician assistants. In the future, CVS and Aetna said that patients will be able to go to a local CVS in between doctor visits for glucose level monitoring, counseling on how and when to use medications and advice on weight loss programs and better dietary habits.
The new company says it wants to create a “new front door” to the health care system.
If realized, that vision could save patients a lot of time and money. How quickly customers might start saving — and how much cheaper drugs might actually be — isn’t yet clear.
Advocacy groups have criticized the deal.
“The combination of CVS and Aetna creates an enormous market force that we haven’t seen before,” said George Slover, senior policy counsel for Consumers Union, in a statement on Wednesday. “This type of consolidation in a market already dominated by a few, powerful players, presents the very real possibility of reduced competition that harms consumer choice and quality.”