CVS Health Corp.’s deal to acquire Aetna Inc. for about $67.5 billion in cash and stock has the health care industry abuzz, nearly overshadowing the other weekend's major news, the passage of the Senate's tax bill. Granted it's going to take experts just a little bit longer to weigh the effects of that 500-page document on health care, but for now, those in the industry have plenty to say about the CVS/Aetna deal.
For the most part, everyone agrees that the move has the potential to disrupt health care--whether it delivers, however, depends on a nunber of factors. What could change, and what would it mean for consumers? Let's hear from three industry leaders:
Brian Marcotte, CEO of the National Business
Group on Health in Washington, D.C.
"This acquisition is unlike others we’ve seen in health care, which have been more horizontal than vertical. We’ve seen other vertical acquisitions, such as hospitals becoming insurers, but the concern we’ve had is that there’s not a good track record of these health care mergers improving customer experience or lowering the cost of health care.
"What’s interesting about this one is that it does have the potential to create better access and more convenience to consumers through CVS’ retail pharmacy network. However, CVS will need to expand the number of its clinics, and not just the number of locations, but maybe also the breath of services in order to do that. If they can deliver that, it could result in lower costs for these types of services.
"One of the challenges with retail clinics today is that they pretty much sit outside the health care ecosystem. Without networks, is there a way to integrate the health care delivery in retail pharmacies into the broader delivery system, and share the data and integrate better with primary care offices? Maybe retail can take on routine care, freeing up primary care physicians to deal with more complex issues.
"The question that employers will have is whether this new entity can execute, given that health care is local, with a very fragmented delivery system. The track record from the mergers within health care haven’t been great, so skepticism will be around execution – but the opportunity is there.
"The other question is whether this new entity can disrupt an overly complex pharmacy supply chain, or will it otherwise continue to entrench an already entrenched business model? There are possibilities around the management of both pharmacy and medical collectively. When managed separately, that sometimes creates the wrong incentives, but integrating pharmacy and medical management can impact the total costs of care."
Jim Winkler, global chief innovation officer
of Health at Aon, Norwalk, Connecticut
"We’re all working off fairly limited amount of information at this point, but to us, this is a transaction that has the potential to be transformative as it relates to how health care is accessed and paid for – and not just pharmaceuticals.
"There is lots of coverage around pharmaceuticals, given this is CVS, but we look at this as one of many things that is happening in health care that seeks to transform the way we seek care from traditional players in this ecosystem – potentially creating space for new entrants to come in.
"While this is a very big transaction between two very big companies, this is really going to be one where innovation has to have as big as a seat at the table as integration when the two companies come together. In a typical merger-of-equals by competitors in the same space, it’s really about integration – taking out costs. But since this transaction is by adjacent players in different parts of the health ecosystem, it’s really important for the leaders to think about how to build a combined company that’s driven by innovation and transformation in the marketplace.
"It’s not just about nuts and bolts about how to integrate the two – innovation will be the most impactful part of the success story."
Dinesh Sheth, chief executive of Green Circle Health
Pensacola Beach, Florida
"For Aetna, this deal makes perfect sense, to realize their investment value for their stockholders. It’s a great transaction for Aetna on the business side. For CVS, it remains to be seen. They are branching out into unchartered territory. They already own a PBM, Caremark, but to buy an insurance company – it’s a very interesting expansion of their own business.
"It’s intriguing how they are going to monetize [the acquisition] when they are projecting only $750 million in post-merger synergies. That’s not a huge consideration for the price they are paying. I think the success of the merger is going to depend on how much additional business will be derived from the insurance business.
"Now from the consumers’ point of view, if an individual is already an Aetna customer, then there’s not much change, as Aetna is already using CVS Caremark as their PBM. CVS has other clients that buy from the PBM, and for those clients, the question will be what synergies Aetna brings to the table.
"If you are a large corporate client and are using CVS Caremark, but your insurance is provided by Anthem or UnitedHealthcare, do you now go to Aetna? Then you will be helping grow that side of the business for CVS."