Why CVS wants to buy Aetna

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Why CVS wants to buy Aetna

By Gina Acosta - 10/27/2017

CVS is moving further away from retailing and closer to health services as a way to stave off intensifying competition.

The Wall Street Journal and The New York Times reported Friday that CVS Healthcare is in talks to acquire Aetna for more than $200 per share. Representatives of both companies declined to comment on the report.

The news comes after the St. Louis Post-Dispatch reported that Amazon has gained licenses in 12 states to become a wholesale prescription drug distributor. Amazon has also recently acquired the domain name AmazonRX.com.

"“It is not unreasonable to consider CVS as a likely buyer of Aetna," said Steven Halper, an analyst with Cantor Fitzgerald. "CVS acquired Caremark in 2006, which at the time was a bold move as it combined one of the larger drug retailers with one of the largest pharmacy benefit managers. With the acquisition of Aetna, CVS would continue its transformation to a health services company. The addition of a captive pharmacy network and captive PBM would enhance AET’s health plans’ competitive positioning. UnitedHealth has been an active acquirer of provider assets and owns the third largest PBM. It does not own retail pharmacies. Furthermore, perhaps CVS views Aetna as a counter move to the potential entrance of Amazon into the mail order pharmacy space.”

CVS currently operates 9,600 stores in its portfolio.

Last week the company announced a new 30,000-store performance-based pharmacy network anchored by CVS Pharmacy and Walgreens, along with up to 10,000 community-based independently owned pharmacies across the United States.  The network is designed not only to deliver unit cost savings, but also to improve clinical outcomes that will lead to lower overall health care costs for CVS Caremark pharmacy benefit management (PBM) clients and their members. 

"Steadily increasing drug costs, and the current transition in health care from volume to value, require us to continually develop and implement innovative solutions to help our clients manage pharmacy costs while improving health outcomes," said Jon Roberts, Chief Operating Officer of CVS Health.  "This partnership with Walgreens, CVS Pharmacy and independent pharmacies enables us to offer a new kind of pharmacy network that provides our clients with opportunities to improve health outcomes and lower overall health care costs, along with comprehensive, nationwide access to medications for their patients."

Performance measures for participating pharmacies will include demonstrated medication adherence for chronic conditions that are impactful to client costs (e.g., hypertension, diabetes, respiratory conditions and behavioral health). Participating pharmacies are encouraged to implement their own proprietary programs and workflow processes to enable them to deliver results related to the measures being tracked.

"Walgreens is pleased to advance our commitment to improving patient care and health outcomes through improved medication adherence by participating in this new performance pharmacy network," said Alex Gourlay, Co-Chief Operating Officer of Walgreens Boots Alliance and President of Walgreens. "This network recognizes that pharmacists do more than dispense medications – they are key members of the patient care teams and add value by helping and encouraging patients to take their medications as instructed, improving overall health and wellness while lowering costs for patients and payers.  Tracking performance provides additional accountability and incentive to achieve measurable outcomes."

CVS Caremark will make this network available to eligible PBM clients for implementation beginning March 2018.