“This is a watershed event. The entire health care system is about to converge”
CVS Health has agreed to buy Aetna for about $69 billion. The merger, if completed, would be the largest health insurance deal on record and would combine the biggest US drugstore chain with the third-largest health insurer. It represents a new type of experiment in health care industry consolidation.
The agreement between CVS and Aetna, first reported by the Wall Street Journal, has reportedly been in the works for some time. The combined business would push some of Aetna’s 22 million customers into CVS drugstores to fill prescriptions through CVS’s drug plans, which could help their brick-and-mortar stores as retail is struggling. Aetna’s insurance plans, meanwhile, would get greater access to the place their customers go for care.
And this could be the first of a coming wave of health care mergers that could affect what you pay for prescription drugs, how businesses buy health insurance, and how health care companies are structured.
“Your retail pharmacy wants to be a bigger piece of your health care and is buying greater access to you by purchasing and insurer,” Leemore Dafny, an economist at Harvard Business School, told me. “And they’re betting that they’ll be able to drive more revenue through that storefront, and the insurer would presumably be betting that they could lower total spend or raise quality through that integration in a way that they can’t just through an arm’s-length relationship.”
Managing pharmacy benefits is a big business
Pharmacy benefits managers — which include companies like CVS and Express Scripts— are the sort of middlemen between insurers and drug companies. They are contracted by health plans, employers, unions, and government entities to manage prescription drug programs and, over time, have taken advantage of their Read More Here