Follow-up to CVS to Buy Aetna

As I reported last month, and in today’s New York Times and Wall Street Journal, CVS has agreed to buy Aetna for $69 billion, reshaping the US health care industry, according to the Times article.

The transaction, the article said, is one of the largest of the year, and would combine the drugstore giant with one of the biggest health insurers in the US. It would blur the lines between traditionally separate spheres of the health care industry.

This move by CVS is response to moves by Amazon, which has quietly laid the groundwork for an entry into the United States’ pharmacy business.

According to the Wall Street Journal article, Aetna stockholders will receive $207 a share, $145 in cash and 0.8378 of a CVS share, or $62 in stock.

 

This entry was posted in acquisitions, Aetna, Consolidation, CVS Health Corp., Health Care, Health Insurance, Health Plans, Insurance, Pharmacies and tagged , , , , , on by .

About Transforming Workers' Comp

Have worked in the Insurance and Risk Management industry for more than thirty years in New York, Florida and Texas in the Claims and Risk Management spheres, primarily in Workers’ Compensation Claims, Auto No-Fault and Property & Casualty Claims Administration and Claims Management. Have experience in Risk and Insurance Business Analysis, Risk Management Information Systems, and Insurance Data Processing and Data Management. Received my Master’s in Health Administration (MHA) degree from Florida Atlantic University in Boca Raton, Florida in December 2011. Received my Master of Arts (MA) degree in American History from New York University, and received my Bachelor of Arts (BA) degree in Liberal Arts (Political Science/History/Social Sciences) from SUNY Brockport. I have studied World History, Global Politics, and have a strong interest in the future of human civilization in all aspects; economic, political and social. I am looking for new opportunities that will utilize my previous experience and MHA degree. I am available for speaking engagements and am willing to travel. LinkedIn Profile: http://www.linkedin.com/in/richardkrasner Resume: https://www.box.com/s/z8rxcks6ix41m3ocvvep

1 thought on “Follow-up to CVS to Buy Aetna

  1. Transforming Workers' Comp Post author

    Comment by Don McCanne

    When two for-profit mega-corporations merge, you can be sure that it is about the money, making more of it, much more. Although they may promise greater efficiency and lower costs through integration of services, the record so far suggests that such mergers provide greater market leverage and thus higher prices. That should certainly have us concerned, but there is something potentially much more ominous here.

    Insurers today not only serve an intermediary role of processing claims, they also want to manage care. They benefit not only by selling us superfluous administrative services through higher insurance premiums, but also they game the system to increase profits, and they reduce patient access to beneficial health care services, allowing their insurance products to be more competitive.

    But look at what is happening here. CVS not only has a huge pharmacy business, but they also have incorporated into their system Caremark, one of the nation’s largest pharmacy benefit managers – the middlemen that seem to be a major contributor to escalating drug costs. They also operate 1,100 retail health care clinics. What is particularly disconcerting is that they intend not only to provide walk-in and preventive services, they now want to provide oversight of chronic illnesses such as diabetes or heart disease. Chronic care is playing a much greater role in health care delivery, and CVS/Aetna wants in on the action. Care would be provided by nurses, pharmacists, and others (presumably lower-wage assistants – physicians have not been mentioned in the news reports).

    Now add Aetna. Although the surviving organization will be CVS Health Corp., the Aetna division will remain intact with current Aetna executives, including Mark Bertolini, serving on the CVS board. Look at the package they will offer: insurance services, care management, bread and butter clinical services including the rapidly expanding field of chronic care, pharmaceutical services with their high prices and pharmacy benefit management, and a retail department of home health products.

    This package is so complete that they could exclude everything else from their networks. Since some people will need highly specialized services or care in full-fledged emergency departments or in hospitals, the Aetna division could sell catastrophic plans as part of their deluxe package.

    Aetna and CVS are not the only ones in this game. Other players or potential players include UnitedHealth with its surgery centers, urgent care clinics, and Optum pharmacy benefit manager, Anthem which is now forming its own pharmacy benefit manager, maybe Humana and Cigna, and now even Amazon is expected to move into the arena big time.

    But what about physicians in their offices out in the community? Don’t need them. The primary care physicians could provide direct care or concierge care though they would have to rely on more affluent cash paying patients since the insurers would limit their networks to their own clinics staffed with lower cost professionals. And how many cash practices do you think could be supported in an economy with stagnant wages? Some of the specialists might survive as hospital employees, working in their outpatient clinics to see the really complicated cases referred by CVS-type retail clinics.

    Can the for-profit corporate world really take over? To a great extent, it already has. With the pending tax legislation, the public seems to be accepting an even greater transfer of wealth to the top. How is this development in health care any different?

    But if we really care, we could throw out the plutocrats and establish our own single payer national health program with free choice of our health care professionals and institutions, in a system that all of us could afford. If we care.

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