Almost a year later, pharmacy giant CVS Health has closed its blockbuster deal to acquire health insurer Aetna Inc., a cross-industry merger whose impact stands to ripple across the U.S. health care market.
CVS on Wednesday pegged the transaction’s total value at $78 billion, including $70 billion ($212 per share) to purchase Aetna and the rest for the assumption of the company’s debt. That’s about $1 billion more than when Woonsocket, R.I.-based CVS announced the deal last December.
Going forward, the combined company's shares will be listed under the symbol “CVS” on the New York Stock Exchange. Plans call for Hartford, Conn.-based Aetna to operate as a stand-alone business within CVS Health and be led by members of its current management team. The companies said the Aetna brand name will continue to be used for health insurance products.
CVS and Aetna executives said the merger fills gaps in the nation’s health care system and provides an opportunity to redefine access to high-quality care in lower-cost, local settings, including in the community, at home or via digital tools.
“Today marks the start of a new day in health care and a transformative moment for our company and our industry,” CVS Health President and CEO Larry Merlo said in a statement. “By delivering the combined capabilities of our two leading organizations, we will transform the consumer health experience and build healthier communities through a new innovative health care model that is local, easier to use, less expensive and puts consumers at the center of their care.”
CVS-Aetna will serve as a “front door” to health care for Americans, Merlo noted. “Our combined company will have a community focus, engaging consumers with the care they need when and where they need it, will simplify a complicated system and will help people achieve better health at a lower cost,” he explained. “We are also leading change in health care by challenging the status quo with new technologies, business models and partnerships. In doing so, we will continue to deliver on our purpose of helping people on their path to better health.”
For example, CVS said the merged company could provide an integrated yet local health care experience by connecting Aetna’s extensive network of providers with CVS Health’s multiple access points and broad menu of health services. That includes more than 9,800 CVS Pharmacy locations, 1,100 MinuteClinic in-store clinics, Omnicare senior pharmacy solutions, Coram infusion services and thousands of CVS Health nursing professionals providing in-clinic and home-based care nationwide.
CVS Health’s businesses also include the second-largest U.S. pharmacy benefit manager — CVS Caremark, serving about 93 million members — plus CVS Specialty, one of the nation’s biggest specialty pharmacies, and a leading stand-alone Medicare Part D prescription drug plan.
Serving about 39 million people, Aetna brings to the table a diverse range of traditional, voluntary and consumer-directed health insurance products and related services. Those include medical, pharmacy, dental, behavioral health, group life and disability plans, medical management capabilities, Medicaid health care management services, workers’ compensation administrative services, and health IT products and services.
CVS said Wednesday that the rollout of its new health care model with Aetna is already under way. In the coming months, the company plans to launch new programs and services to boost access to care, improve health outcomes and pare medical costs for all consumers. A core focus is better, more efficient management of chronic disease by leveraging the networks, technology and staff of the combined company.
Enhanced community health offerings will include services to improve patients’ management of chronic conditions, as well as an expansion of services at MinuteClinic, nutritional and behavioral counseling and benefit navigation support, plus assistance with durable medical equipment, digital health apps and connected devices. CVS said it also will build on its successful Project Health screening events at CVS Pharmacy and Aetna’s commitment to building healthier communities to offer new preventive health screenings in communities that are identified as high-risk for certain health challenges.
MinuteClinic will also be introducing newly expanded chronic care management services.
Additionally, CVS Health is developing innovative new medical cost-reduction programs to improve medication adherence and avoid hospital readmissions and unnecessary emergency room visits. This will include timelier and more comprehensive medication reviews as well as expanded services and hours at select MinuteClinic locations to reduce inappropriate emergency room use.
“By fully integrating Aetna’s medical information and analytics with CVS Health’s pharmacy data, we can develop new ways to engage consumers in their total health and wellness through personal contacts and deeper collaboration with their primary care physicians,” according to Merlo (left). “As a result, we expect patients will benefit from earlier interventions and better-connected care, leading to improved health outcomes and lower medical costs.”
For retailers offering pharmacy and other health-related services — including drug and supermarket chains as well as mass merchants — the union of CVS and Aetna will further increase the pressure to provide more comprehensive care options, industry observers say. Supermarket retailers already have been sharpening their focus on health and wellness by expanding pharmacy and immunization services, adding in-store clinics, partnering with medical providers and hospital systems, investing in specialty pharmacy programs and deploying in-store dietitians.
At the same time, changing economics in the prescription drug industry have made competition tougher for retail pharmacy operators, especially smaller players. Rising drug prices, the need for scale to lower drug procurement costs and booming growth in expensive specialty drugs — which can require added services and special handling — have fueled consolidation among pharmacy retailers, drug distributors and pharmaceutical manufacturers. Cuts in Medicare and Medicaid reimbursements and costs like direct and indirect remuneration (DIR) fees also have squeezed profits.
And along with CVS-Aetna, another formidable competitor looms: Amazon. The e-tail giant in late June unveiled a $1 billion deal to acquire online pharmacy PillPack. While Amazon’s entry into the pharmacy arena had been rumored for quite some time, the addition of PillPack helps the company meet a number of needs in one fell swoop, such as pharmacy licenses in all 50 states, health accreditations, PBM network memberships (including for Part D plans), and prescription drug software systems and tools.
CVS’ Merlo also stressed the importance of reach in the merger with Aetna. “With a physical presence in almost every community across the country,” he commented, “we have the unmatched ability to meet consumers where they are and provide the care and services they need, either face-to-face or with the unique set of virtual and physical delivery service capabilities that extends our physical presence in real-time to meet their needs.”