CVS Health Reportedly In Advanced Discussions To Acquire Aetna
The provider / payer business model strategy is gaining traction in the healthcare industry
CVS Health ( NYSE: CVS ) , a healthcare conglomerate comprised of chain drugstore, in-store clinic, mail order pharmacy, specialty pharmacy, home infusion service and PBM business units, is reportedly in acquisition talks with health insurer Aetna. Such a deal would reach or exceed $66 billion dollars.
…CVS Health and Aetna executive leadership have not officially commented on any details regarding a potential merger & acquisition deal…
Just months ago, Aetna’s proposed deal to acquire rival health insurer Humana fell through due to regulatory / antitrust concerns just as Cigna’s deal to buy Humana ended unsuccessfully
CVS Health has been on a roll. It recently entered into a joint venture agreement with Anthem, the nation’s largest Blue Cross Blue Shield affiliate comprised of 14 BCBS plans. CVS Health will be Anthem’s PBM vendor through a partnership arrangement known as “IngenioRx”. The deal is especially lucrative in that it allows for CVS Health to enhance the position of its Minute Clinics as a healthcare provider for Anthem members. There are about 1,000 Minute Clinics currently operating within CVS retail pharmacy stores.
While CVS is well known for its chain drugstores, Minute Clinics and PBM businesses, it is important to know CVS runs one of the largest home infusion operations in the nation and owns / operates the retail pharmacy units within Target stores which total over 600 locations. Anthem’s incumbent PBM, Express Scripts, will no longer be Anthem’s PBM partner effective January 2019. Express Scripts has moved forward with acquiring medical benefits manager EviCore for $3.6 billion and has openly commented it would be open to exploring business opportunities with Amazon.
CVS Health, based in Woonsocket, Rhode Island, ranks at number 7 in the Fortune 500; Aetna, headquartered in Hartford, Connecticut, ranks at number 47
Aetna is an established leader in the health insurance industry. Founded in 1853, it markets employer health benefits and consumer-directed health benefits and associated services. Its plans / programs span behavioral health, dental care, disability, long term care, medical, pharmacy and other offerings.
An acquisition of Aetna by CVS Health would fortify CVS Health’s position as a provider and payer, a healthcare business model option currently being hotly cultivated by UHC / UnitedHealth Group and its Optum unit (which already owns a chain of physician clinics and acquired outpatient surgery center chain Surgical Care Affiliates for $2.3 billion in 2016). It would also help CVS Health defend its business against potential incursions by Amazon as it seeks to widen its reach into the healthcare industry. It is reported the CVS Health / Aetna deal would be formally announced during December, 2017.
CVS Health generates over $146 billion in annual sales; Aetna’s annual sales are over $63 billion
Conceivably, with UHC and CVS Health embarking on large scale payer / provider tandem business models and the threat of Amazon’s strategy to expand into the healthcare industry, other sector leaders like Cigna, Express Scripts, Humana, Walgreens and Walmart may be assessing their merger & acquisition and business model options accordingly. With Amazon on the move in the healthcare sector and Express Scripts openly conveying its willingness to engage Amazon about business opportunities, there are likely to be significant developments across the bandwidth of these leading managed care organizations and pharmacy providers.
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