Health care: Will CVS-Aetna merger lower prices?
A megamerger unveiled this week “could shake up the health-care industry,” said Carolyn Johnson in The Washington Post. Drugstore titan CVS is buying Aetna, the nation’s third-largest health insurer, for roughly $69 billion. If approved by regulators, the “blockbuster acquisition” would create “a giant consumer healthcare company with a familiar presence in thousands of communities.” CVS hopes to use its tie-up with Aetna to become a medical hub, with its 9,700 retail stores and 1,100 walk-in clinics providing primary care and basic procedures, and the massive amounts of data from Aetna’s 22 million members leveraged to “manage all aspects of a patient’s health.” The impetus for this deal “largely comes down to Amazon,” said Chris Morris in Fortune.com. Amazon recently won approval from 12 states to become a wholesale prescription drug distributor—a development that could upend the pharmacy business in the same way Amazon has disrupted retail, books, and cloud computing. Combining with Aetna now would allow CVS to “remain competitive” if the e- commerce giant enters the market.
The companies say this merger will “improve your health care,” with cheaper drugs, more options, and better convenience, said Reed Abelson and Katie Thomas in The New York Times. “Whether this rosy future will become reality, however, is far from certain.” Both companies are already major health-care players, and “if they wanted to change the world,” its critics wonder, “why haven’t they done so already?” Granted, the merger could give the combined company more leverage in negotiations with drug manufacturers, which could result in lower prices for employers and consumers. But Aetna’s largest competitor, UnitedHealth, owns a pharmacy benefits manager just as CVS does, and “drug prices have continued to rise.” This merger “isn’t being driven by a desire to help ordinary Americans manage their health-care costs better,” said Michael Hiltzik in the Los Angeles Times. “It’s driven by the desire to fend off scary new competitors in the health-care industry.”
Yet the CVS-Aetna union could “actually make treatment simpler and easier” for many Americans, said Linette Lopez in BusinessInsider.com. CVS has “a ton of brand familiarity,” and turning brick-and-mortar stores into treatment centers could help patients get care faster and more often. You can imagine pharmacists and nurses monitoring patients who were recently released from the hospital, reviewing and managing their medications and helping keep them from being readmitted, “a major, avoidable cost in health care.” If the deal receives antitrust approval, which seems likely, it will be “a watershed event” in the industry, said Emily Stewart in Vox.com. It could set off a wave of mergers affecting “what you pay for prescription drugs and how businesses buy health insurance.” Even a small number of tie-ups will lead to a market with fewer, more powerful players, making it harder for new firms to break in. That would be no coincidence, considering “the looming threat” of Amazon.