For an overview of what we saw at the time as reasons why and possible competitor reaction, Readers should look back to our original article [TTA 28 Oct]. It’s being presented by both companies as a vertical merger of two complementary organizations, which already were moving towards this model, integrating their different services into “America’s front door to quality health care” (CVS CEO Larry Merlo)–a lower cost setting that saves premium dollars and brings integrated care to consumers’ doorsteps.
CVS brings to the table huge point of care assets: 9,700 pharmacy locations, 1,100 MinuteClinics, Omnicare’s senior pharmacy solutions, Coram’s infusion services, and the more than 4,000 CVS Health nursing professionals providing in-clinic and home-based care. Aetna has about 23.1 million medical members, 14.5 million dental members, and 15.2 million pharmacy benefit management (PBM) services members. Aetna also has a wealth of advanced data analytics capabilities through two subsidiaries, ActiveHealth Management and Medicity’s health information exchange technology.
Seeking Alpha has an intriguing POV on this entry into a ‘new era’: that both CVS and Aetna consider this to be a long-term reshaping of their business model under the threat posed by Amazon, and are willing to do this despite little short-term financial benefit for either company. The problem as the writer sees it: execution. This is re-engineering care on a national scale, and its benefits are based upon combining intangibles, a murky area indeed especially in healthcare. Time is also a factor, as Amazon is getting pharmacy licenses in multiple states, and is rather an expert at combining intangibles.
Does it signal that the approach to a ‘new era’ in healthcare is accelerating? If this is a preview, 2018 will be extremely interesting. Our ‘canary in the coal mine’ may tweet–or fall over on its perch, asphyxiated.
Some additional points to consider:
- Investors do not consider this a ‘done deal’ based on the bouncing around of both companies’ share value–at least this week. Mergers of this size and in healthcare will certainly be reviewed by the Federal Trade Commission (FTC) and possibly the Department of Justice (DOJ), which scuppered Aetna’s last merger deal with Humana.
- A senior US House Energy and Commerce Committee member, Rep. Frank Pallone (D-NJ), has called for a hearing on the merger ASAP. (The Hill)
- Consumer groups are already griping and Congress tends to listen to these gripes. The Coalition to Protect Patient Choice (CPPC), which generally opposes PBMs, said that “mergers like these have a dismal history,” adding, “consumers suffer by paying more and getting less choice for the vital drugs they need.” (CNN Money)
- The estimated payout to Aetna’s CEO Mark Bertolini is $500 million, which already is controversial. (KXLH/CNN Money)
- One writer in Forbes considers the merger a ‘mortal threat’ to hospitals because of the MinuteClinics and the opportunity the combined entity will have to reach both in retail locations and into homes using–believe it or not–telehealth and telemedicine. Hospitals could unite and oppose the merger, even though many of them have allied with CVS clinics. But this alliance of hospitals with retail clinics, including Walgreens Boots, may be too little, too late for hospitals.
How CVS’ chief competitor, Walgreens Boots, is reacting is–not much, according to this report in Crain’s Chicago Business. It will continue on a path of partnering with other PBMs and insurers, as well as boost its front of store operations in areas like food and cosmetics. But then, there’s always Anthem or Cigna–or fitting into giant UnitedHealth Group, which already has urgent care clinics, practices, surgery centers under OptumCare, and lacks retail outlets. Stay tuned. CVS-Aetna joint release, MedCityNews