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CVS to Purchase Aetna With Idea of Remaking Consumer Healthcare Experience

Laura Joszt
CVS Health has proposed purchasing health insurer Aetna in a $69 billion deal that could disrupt the pharmacy benefit management business and "remake the consumer healthcare experience," according to CVS Health's president and CEO.
The retail pharmacy CVS Health has proposed purchasing health insurer Aetna for $69 billion in a merger that spans business lines in the healthcare industry. The proposal comes less than a year after Aetna and Humana called off their proposed merger—first announced in July 2015—when federal judges blocked it.

According to CVS Health President and CEO Larry J. Merlo, the merger of CVS and Aetna will “remake the consumer healthcare experience.” It will integrate doctors, pharmacists, and other health professionals with health benefits to create an easier experience for consumers.

"This is the next step in our journey, positioning the combined company to dramatically further empower consumers," Mark T. Bertolini, Aetna chairman and CEO, said in a statement. “Together with CVS Health, we will better understand our members' health goals, guide them through the health care system and help them achieve their best health. Aetna has a proud tradition of continually innovating to address unmet consumer needs and providing leading products and services to the marketplace."

History of Consolidation
In 2015, when the healthcare industry was awaiting the outcomes of the proposed Aetna–Humana and Anthem–Cigna mergers, Austin Frakt, PhD, a health economist and a member of The American Journal of Managed Care® (AJMC®)’s editorial board, commented during a discussion that health economists generally feel that consolidation in the healthcare market is not good for consumers.

“There’s unanimity on this issue that when you have consolidation among health insurers or providers, you generally don’t get good results for consumers,” Frakt said during the Healthcare Reform Stakeholders Summit, Fall 2015. He added that generally the result is higher prices. Sometimes there will be higher quality of care, but not always.

Rita E. Numerof, PhD, the co-founder and president of Numerof & Associates, told AJMC® that mergers that occur across business lines might not be scrutinized as much or in the same way as traditional mergers that may be blocked.

“We’re now looking for opportunities for integrating more diverse businesses,” she said. “I think that the [Federal Trade Commission] and other government agencies will look more favorably upon this assuming that their integrations in fact create value for consumers and don’t create monopolies that are going to create anti-competitive situations.”

Frakt wrote in a new post for The New York Times’ blog, The Upshot, that the proposed merger between CVS and Aetna is different from some of the megamergers that were blocked by federal judges in the past, because it will disrupt the pharmacy benefits management market and more closely align “management of drug benefits and other types of benefits in one organization.”

However, it’s important to note that these mergers that go across business lines face more challenges as they move into new business that is not core to the company’s current business. Integrating the businesses will be more difficult, as will creating value consistent with the original visions of each business. In general, half of all mergers and acquisitions fail, and theses cross-business mergers that get companies into new spaces will be even more difficult to do well.

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