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CVS agrees to buy Aetna in $69 billion deal

One of biggest pharmacy players in the marketplace, CVS Health, announced that it has agreed to buy Aetna for $69 Billion. This works out to be approximately $207/share with $145 in cash and the rest in stock. The deal is expected to close, with regulatory approval in the second half of 2018.  Today there was a call for congressional hearings to see if this is merger will lead to a better landscape or do more harm.  So, more news to come.

What does this CVS acquisition of Aetna mean?

In the short term, CVS could provide a very wide range of services to the 22 million Aetna medical members. This could include expansions in the walk-in clinics, efficiencies in pharmaceutical sales and provide CVS with something other than just retail sales. We may see a better use of health data from both Aetna and CVS (stores and minute clinics) to create a better experience for all consumers. This could also lead to lower costs for care at Minute Clinics and in health care premiums.

Early reports indicate that CVS is considering transforming its locations into some sort of community health hub where pharmacists and nurses can provide services to individuals recently released from hospitals to help them stay out of the hospital. There also some signs that this combination could be a place where individuals go rather than to the emergency room. This could also extend into general wellness, nutrition, vision and hearing screening services. CVS could be positioning themselves in front of health issues to support a healthier person and thereby saving health care costs across the board. Health insurance providers want to get closer to the consumer so that they are better able to manage the aspects of a person’s health better, this could be that way fro Aetna. Many people agree that in the future you will see much less retail (where items can be purchased easily online) and more emphasis on health care from within the CVS stores. The combination CVS/Aetna group will have to take steps to convert customer perceptions that include a feeling that CVS sells eye make-up and toys so why would it be the place to go for health care?

Large companies that employ many have traditionally kept their prescription drug benefits separate from medical coverage. These companies feel they can get a better, lower cost deal by shopping these benefits around separately. This merger could change that thinking as CVS and Aetna argue that this deal will lower costs and give them the ability to negotiate drug prices down and the management in the use of these drugs up. We feel that this will lead to more companies when they look to negotiate their health contracts next year, to look to see if it is better to pull these services together or will overall savings occur by keeping health and pharmacy separate.

This may be the first in other health services mergers as this industry attempts to insulate themselves from competition from Amazon that is expanding into the sale of prescription drugs and from health insurers that have brought drug price negotiations in-house rather than using a middle man as CVS now becomes that middleman for Aetna.

We continue to monitor all aspects of the health care industry and will help guide you through the changing landscape. Our goal is to provide you with the maximum amount of savings in health care costs while still providing the right set of services to your employees.

Please contact us for more details.

Contributing sources as well as additional information on this merger can be found here:

Washington Post
CNBC / CNBC
Chicago Tribune
New York Times

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