CVS Merger With Aetna Means Big Win For Insurance Cuts

CVS and Aetna logos together

By: Alexandra Heim

The Justice Department has announced that the CVS Health chain has been approved of its $69 billion antitrust with health insurer Aetna. Once the deal has been closed it is estimated that CVS will cut costs by $750 million each year, starting at the end of the second year of the deal. Following the merger, CVS Health President Larry Merlo spoke after the merger was announced, saying “CVS Health and Aetna have the opportunity to combine capabilities in technology, data and analytics to develop new ways to engage patients in their total health and wellness.” As the transition of the businesses continues, Aetna’s chief executive Mark Bertolini will be joining the CVS board. After merger has been done, it is projected that not only will the companies cut health care costs, but also encourage the 22 million Aetna insurance subscribers to take up walk-in clinics within CVS. These walk-ins will be offered at a reduced price of medical services and will provide more precautionary services and screenings at its facilities; moreover, patients with diabetes will now be able to monitor blood sugar levels, preventing them from visiting doctors charging more expensive prices. CVS will not only be able to provide its customers with lower prices of their drugs, but it could also plan to grant exclusivity to Aetna customers to access drugs at their local stores.

This merger is the second largest recent health care deal approved by the DOJ last month, first being the approval of Express Scripts, the nation’s largest pharmacy benefit manager, being bought in a $52 billion deal with health insurer Cigna. The shares of both companies, Aetna and CVS, have risen by 1 percent as of Wednesday of last week, a week where the market was not only going over restructuring itself, but the market was sharply lower as well. In order to control the amount of power CVS has over the Medicare insurance market, the companies were required to sell Aetna’s Medicare Part D, their prescription drug plan business. Without this sale, CVS would own more than 30 percent of shares in those drug plans, something the Trump administration has been attempting to deal with.

The administration has been putting pressure on the “middlemen: of the health care industries, claiming that they are increasing the cost of prescription medication for its consumers. They are mostly cracking down on Pharmacy Benefit Managers, one in which CVS has a large business with by the name of Caremark. President Trump has signed two bills to place some form of control over the PBM’s and their practices. The bills would prohibit pharmacists from allowing patients access to the cheapest prices of their drugs. With the enactment of the bills, it will significantly cut back profits made by PBM, but with the merger of CVS and Aetna in the works, CVS will regain all profit lost through Aetna.              Companies are considering changing their traditional business models in order to compete with Aetna and CVS. The traditional line between insurance companies and providers has been crossed through these mergers regarding how they become responsible for paying for care as well as delivering it. This business can allow customers to avoid the expenses of hospital costs and travel to their local CVS for a medication regimen for much cheaper, allowing them to be less for flu shots and much more important for treatment and physicals, competing with fellow health care insurers. This merger is believed to be put into effect in the fourth quarter of 2018.