CVS Health Agrees to Buy Aetna, Possibly Reshaping US Healthcare

CVS Health has agreed to purchase Aetna, a transaction that would combine CVS’s retail pharmacies with Aetna’s health insurance company in a $69 billion deal that could create a company with annual revenue of $240 billion, and that has the potential to reshape the US healthcare system.

CVS Health and Aetna envision the resulting company as a community-based hub dedicated to connecting pathways needed to improve health, answering patients’ questions about health conditions, and providing prescription drugs and health coverage. The transaction is expected to close in the second half of 2018.

A joint statement from the 2 companies said that the purchase would provide greater integration of care by “…empowering consumers and their health professionals to make more informed decisions.” The companies said that the transaction fills an unmet need in the current healthcare system and presents “a unique opportunity to redefine access to high-quality care in lower cost, local settings whether in the community, at home, or through digital tools.”

The 2 companies presented the change as “the next step in their journey,” positioning the combined company to dramatically further empower consumers, as the new company will be a uniquely integrated, community-based healthcare experience with expanded opportunities to address wellness, clinical, and pharmacy services as well as vision, hearing, nutrition, beauty, and medical equipment products. After the purchase, Aetna will operate as a stand-alone business unit within CVS Health, according to the companies, and will be led by members of their current management team.

Industry analysts say the deal will ripple through the healthcare industry, creating a “behemoth healthcare company” with significant market power, because a combined CVS—Aetna could touch most of the basic health services that people regularly use. The proposed deal may have been prompted by shrinking retail numbers at CVS, and by the looming potential entry of Amazon into the pharmacy business. Analysts have raised the possibility that Amazon may be exploring entry into prescription drug delivery, positioning itself for potential development as a pharmacy benefits manager (PBM) or a partner with one, based on news reports of public records reviews in at least 12 states showing that the company has acquired wholesale pharmacy licenses.

Even though the CVS—Aetna deal is being promoted as a vertical merger that is anticipated to clear any regulatory hurdles, it could potentially face antitrust scrutiny from federal regulators because the scope of the transaction is so far-reaching. The deal could be blocked by federal antitrust officials concerned that it might lessen competition, particularly with respect to Medicare, in which both companies are significant players.

Critics are concerned that customers could also find their choices sharply limited, with patients having fewer choices of where to get care or fill prescriptions if those who have Aetna insurance are forced to go to CVS for most of their care.