What the CVS-Aetna deal means for consumers
Who needs to go to the doctor when you can go to your local CVS drug store instead? That appears to be the logic behind CVS’s decision to buy health insurer Aetna for $ 69 billion.
CVS has more than 9,700 pharmacies and 1,100 Minute Clinics, walk-in locations that offer vaccinations, lab tests and diagnosis and treatment of illnesses like strep throat and ear infections from nurse practitioners and physician assistants.
Combining the operations of CVS (CVS), which also owns pharmacy benefits manager and mail order pharmacy Caremark, with a major insurer like Aetna (AET) could make it easier for people to monitor diseases without having to see a doctor.
CVS CEO Larry Merlo said during a conference call with analysts Monday that the combined resources of CVS and Aetna could make the pharmacies and walk-in clinics kind of like the medical version of the Genius Bar at Apple Stores, with experts dispensing quick, convenient and reliable health care knowledge.
“The combined company will also be able to better understand patients’ health goals, guide them through the health care system, and help them achieve their best health. There will be expanded opportunities to bring health care services to consumers every day,” the companies added in a release.
The company explained this with an example of how diabetics could get quicker, easier treatment.
CVS and Aetna said that patients will be able to go to a local CVS or minute clinic 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.
“These types of interventions are things that the traditional health care system could be doing, but the traditional health care system lacks the key elements of convenience and coordination that help to engage consumers in their health,” Merlo said in the release.
Related: CVS is buying Aetna in a massive health care deal
Merlo added during the conference call that rising health care costs are a major problem for consumers and that the combination of CVS and Aetna will lead to lower expenses and better service for consumers and health care providers.
It’s unclear just how quickly customers might start seeing savings — and how much cheaper drugs might actually be, for that matter.
It’s also not certain if this will mainly be good for the 90 million customers of CVS and Caremark as well as the 23 million people who have Aetna insurance or if people with other insurance and pharmacy plans can also benefit.
CVS also recently took over the pharmacy operations at Target (TGT).
CVS has existing partnerships with UnitedHealth’s OptumRx and is planning to create a new pharmacy benefits management company with insurer Anthem called IngenioRx.
Merlo and Aetna CEO Mark Bertolini, who will join the combined company’s board if a deal goes through. Both stressed that CVS-Aetna will also be better able to serve the aging population in the U.S., which is increasingly relying on the government’s Medicare and Medicaid programs for health care.
Bertolini said during the conference call that many Medicare/Medicaid patients are “confused” and “wandering through the system” seeing numerous doctors and taking many different medications.
He said that the CVS-Aetna merger can eliminate much of the “unnecessary complexities” consumers face when seeing a doctor and create a “new front door to the health care system.”
In other words, CVS and Aetna would rather that sick people go to a pharmacy or minute clinic first instead of an already stressed emergency room.
So how close to reality is this vision, one where a trip to the drug store makes visits to the doctor’s office or hospital less necessary? That’s not clear. It’s uncertain if the CVS-Aetna deal will be approved by federal regulators.
Keep in mind that Aetna had tried to merge with competitor Humana (HUM) and that deal was blocked on antitrust grounds. So was a deal between two other insurers — Anthem (ANTM) and Cigna (CI).
But the fact that CVS and Aetna are not really competitors could make it more likely that Washington will approve the combination. And if CVS and Aetna are allowed to merge, more deals could follow that may drastically change how you get health care services.
There is already speculation that the other insurers could now be a good strategic fit for CVS rival Walgreens (WBA) as well as Walmart (WMT), which operates a lucrative pharmacy business.
There is also rampant speculation about what plans Amazon (AMZN, Tech30) has for the drug business after it received wholesale pharmacy licenses in a dozen states in October.
Related: CVS to offer next-day drug delivery
Could Amazon, which has expanded its own brick and mortar operations through the opening of its own book stores and purchase of Whole Foods, be looking to become a big drug store retailer as well?
What’s more, many businesses offer their employees health care plans that feature a combination of one of the big five insurers — UnitedHealth (UNH) is the other — and pharmacy benefits management services from CVS and Caremark, UnitedHealth’s OptumRx or their rival PBM giant Express Scripts (ESRX).
It is possible that if CVS-Aetna leads to other insurer-drug retail deals, then CVS and other pharmacy chains may be able to negotiate for more favorable employee insurer plans and cheaper prices for prescription drugs from Big Pharma giants like Pfizer (PFE), Johnson & Johnson (JNJ) and Eli Lilly (LLY).
The ultimate goal, after all, is a land grab. CVS would rather become the preeminent place for all health care needs before Walgreens, Walmart or Amazon beats them to the punch.
So if CVS-Aetna gets the green light from Washington, the way Americans get medical advice may drastically change over the next few years. More people could go to one-stop shops where they are diagnosed, given medications and treatment plans all at once.
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