CVS, Aetna merger could impact local pharmacies

Andrew Cummings
December 7, 2017

"ORCRP000343-topic.html" class="local_link" >Aetna will test the Trump administration's approach to far-reaching corporate takeovers, just weeks after the US government sued to block a major telecommunications merger.

"A company like CVS has 10,000 brick and mortar locations", said Zack Cooper of Yale School of Public Health.

In the past, deals combining companies up and down a chain of business - such as a supplier and a distributor - have been viewed as posing less anticompetitive risk than combinations of direct rivals.

The only pricier deals involving companies based our six-state region were: Bell Atlantic Corp.'s purchase of Conn. -based GTE Corp., which was valued at $71.3 billion and completed in 2000; and Conn. -based Charter Communications Inc.'s purchase of Time Warner Cable Inc., which was valued at $78.4 billion and completed in 2016. "It's the overall outcome for the patient", Aetna CEO Mark Bertolini told Reuters in an interview.

Hill said that regardless of Amazon's plans, the CVS-Aetna deal still makes sense for the two companies.

It's also not certain if this will mainly be good for the 90 million customers of CVS and Caremark as well as the 23 million people who have Aetna insurance or if people with other insurance and pharmacy plans can also benefit. The Justice Department's new antitrust chief, Makan Delrahim, has criticized past settlements that allowed vertical deals with behavioral restrictions.

The acquisition comes at a volatile time.

CVS doesn't need to buy Aetna to make that happen, says Lynn Quincy, a consumer health care analyst at Altarum, a health care analysis and consulting firm.

CVS is the No. 2 US provider of prescription drug benefits and competes with larger rival Express Scripts Holding Co ESRX.O .

"Consumers have to be concerned about removal of competition in the marketplace", he said.

A monster deal between CVS pharmacy and one of the nation's largest health insurance companies, Aetna, could impact local pharmacies.

But the fact that CVS and Aetna are not really competitors could make it more likely that Washington will approve the combination.

But the CVS-Aetna combination takes integration to a new level with its 9,700 retail drugstores.

Aetna (aet) shareholders stand to receive $207 per share in the deal with CVS (cvs), the companies said. Leerink analyst David Larsen said in a recent note that the CVS-Aetna deal has a decent chance of approval because regulators may believe it will put pressure on manufacturers to hold down drug prices.

His company provides benefits services for businesses.

The CVS-Aetna deal could attract similar scrutiny if regulators feared it could block Aetna customers from frequenting other pharmacies or contracting with other PBMs, several investors said, asking not to be named because they were not authorized to talk to the press.

Garthwaite says the combination will also alter CVS's incentives when providing pharmacy benefits - which it does now for almost 90 million people including most of those with Aetna health plans. "Nothing about this deal says that's going to change". But he said would be reluctant to get medical services there.

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