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CVS-Aetna Merger: A New Front Door to Healthcare?

When reports initially announced a potential CVS acquisition of Aetna on October 26, many were left scratching their heads, pondering,

 
“Shouldn’t Aetna be the one buying CVS?”

“They’re not even competitors, what’s the point?”

If it weren’t for the Senate’s passage of a sweeping tax reform bill a day earlier, the CVS-Aetna deal would be getting even more attention as it is the largest healthcare deal in history.

Yet, ever since the deal became official, it’s left consumers wondering, why?

Here are three reasons why CVS and Aetna decided to combine:

  1. Scale
  2. The Aetna/Humana deal earlier this year was halted by antitrust concerns causing Aetna to look outside of the direct competition to achieve the scale necessary to succeed in today’s political and economic climate.

  3. Defense
  4. CVS and Aetna see the writing on the wall. UHCOptum are already a force to be reckoned with, Walmart and Humana are rumored to be talking about merging, and it appears inevitable that Amazon too will try to disrupt the pharmacy industry in a big way.

  5. Change
  6. Aetna no longer wants to be seen as an insurance company. It hasn’t been subtle in communicating the new direction charted for the nearly 160-year-old company either. Last October, Aetna’s CEO Mark Bertolini, said, “Insurance is a nasty word. We may not even call it that when we’re done with it.”

    Aetna is posturing itself as a health improvement company with a core competency in the collection and use of data. If Bertolini’s words aren’t indicative of Aetna’s changing view of itself, the company recently offloaded its most “insurance-y” products—life and disability insurance—to its neighbor, The Hartford, and moved headquarters to Manhattan, right across the street from Google’s NYC operations. Rumor has it there will even be a ping pong table in Aetna’s new HQ.

By joining CVS, not only will Aetna gain pharmacy pricing leverage by having an in-house pharmacy benefit manager, it will also obtain a vast array of retail locations to pilot and deploy new health improvement products and services to members and competitors’ members.

CVS will gain insight into healthcare consumer behavior and use the treasure trove of Aetna’s data, provider network relations, and care coordination systems to give consumers even more reasons to visit CVS stores.

The merger also cements CVS’ relationship as Aetna’s pharmacy benefit manager, a partnership that has been in place since 2010.

On the surface it may seem like a strange marriage, but Aetna and CVS believe they have increasingly complementary business models that are better off together. The combined company stands to become a major force in the future of healthcare, not only in the United States, but across the globe. In the words of Larry Merlo, CEO of CVS, the combined company aims to be the “front door to healthcare.”

For questions on how the CVS-Aetna merger might impact your organization, reach out to your OneDigital representative today.

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