CVS Health Corp. and Aetna Inc. is a surprise pairing that makes complete sense.
Combining a retail pharmacy chain and health insurer could be a savvy move, and may bring about a dramatic change in the way people use insurance and buy prescriptions.
With Aetna in its pocket, CVS could guide members to its pharmacy benefit manager and more than 9,700 pharmacies. CVS’s Minute Clinics could become an alternative to emergency rooms. In return, that partnership could help Aetna reduce costs and improve the health of its 23 million members.
Even if it makes sense business-wise, the deal could face antitrust opposition. Mergers that don’t involve direct competitors typically aren’t considered anticompetitive, but this administration appears to be questioning that traditional logic. The Justice Department’s lawsuit to block AT&T Inc. and Time Warner Inc. shows that antitrust officials can be skeptical of “vertical” deals. If the DOJ’s enforcers find problems with dominance in certain product lines or narrow overlapping markets, that could throw a wrench into CVS and Aetna’s grand plan.
In health care, it’s been tough to get regulator sign-offs for mergers of rivals, and Aetna knows that firsthand. In 2016, the DOJ won a court battle to block Aetna’s bid to merge with Humana Inc. A merger of two competing insurers would lead to higher costs for consumers and less innovation, the government argued.
Aetna learned the lesson that if you can’t grow “horizontally” by acquiring companies much like yours, you might as well expand “vertically” by merging with suppliers or businesses with whom you share customers. CVS and Aetna have this relationship. They have the same customers, and Aetna pays for the drugs that CVS pharmacies sell.
A merger with CVS could be the counterpunch to Amazon Inc.’s looming threat to move into health care. The deal would also allow Aetna to take on industry giant UnitedHealth Group Inc., whose pharmacy benefit manager OptumRX has beat out CVS for big contracts. UnitedHealth has an integrated model – part provider, health insurer, and pharmacy benefit manager – that competitors like Aetna rightfully envy.
Other health companies are taking note of the shifting landscape. Express Scripts Holding Co.’s chief executive said last week that he’s open to a deal with a health insurer or partnering with Amazon. “The disruption is an opportunity,” said CEO Tim Wentworth.
If the CVS and Aetna marriage ends gets an easy regulatory approval, it’s possible that we’ll see more mergers of this kind.
Tuesday is the deadline for Allergan PLC to respond to allegations from Shire PLC that the drug company blocked Shire from competing with Allergan in the market for prescription drugs for treatment of dry eye disease available to patients through Medicare prescription drug plans.
The American Antitrust Institute on Thursday will host a roundtable on competition in the airline industry.
The first status conference in the Justice Department’s challenge to AT&T Inc. and Time Warner Inc.’s deal will be on Thursday. Expect a large audience.
“The proposed merger of AT&T and Time Warner is a procompetitive, pro-consumer response to an intensely competitive and rapidly changing video marketplace,” said AT&T in answering the government’s lawsuit.
Want to be alerted to the next post? Let us know and you’ll be added to the mailing list: firstname.lastname@example.org. Also feel free to send tips and takes.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)