U.S. drugstore chain CVS Health's plans to acquire prescription insurer Aetna got the preliminary approval from the U.S. Department of Justice (DOJ). CVS wants to make the acquisition through $69 billion in cash and stock, as revealed by the company in December. If the deal gets through the final stage of regulatory approval, the new merged entity can potentially emerge as a major player in disrupting the healthcare industry and how U.S. consumers access medical care.
Aetna announced on Sept. 27 that it is selling its Medicare Part D drug plan business to WellCare Health Plans, thereby mitigating regulators’ concerns about the conflict of interest between CVS' and Aetna's Medicare Part D plans should the firms merge.
The deal would help CVS gain more data from Aetna about people’s health conditions, which it can use to market its products to individuals and advise people on prevention/precautionary measures while also potentially boosting attendance at its walk-in clinics, MinuteClinics. While CVS currently is the pharmacy benefits manager to Aetna, the merger would only solidify the partnership since it potentially eliminates the possibility of Aetna switching to any other benefits manager in future.
CVS CEO Larry Merlo said that the two companies will create a model that's "easier to use, less expensive and puts people at the center of their care." That’s something even regulators seem to agree with: Assistant Attorney General Makan Delrahim said in a statement that CVS-Aetna merger could reduce Americans’ health care costs and improve the quality of patient care. Medical costs have increased by an average of 5.5 percent or more every year since 2007, according to consulting firm PwC. Recently, the DOJ also green-lighted health insurer Cigna's acquisition of pharmacy benefits manager Express Scripts. Such regulatory approvals are apparently intended to lower healthcare costs for Americans.
CVS’s expected merger with Aetna comes in the face of drugstores facing serious competition from online retailers; Amazon’s acquisition of online pharmacy delivery business PillPack this year potentially adds to the head-to-head.