Author Archives: Peter Luck

The CVS-Aetna Merger: Potential Gain & Loss for Consumers in Light of Growing Consolidation

Earlier this month, the Justice Department approved a $69 billion merger between retail pharmacy company, CVS Health, and managed care company, Aetna. The approval of the merger was conditioned on an agreement that Aetna would sell its private Medicare drug plans. This merger was approved in the wake of a similar vertical integration of the pharmacy benefit management company, Express Scripts, by major insurance company, Cigna. Consolidation in the health care industry is a growing trend that will impact drug prices and the way in which millions of Americans receive health care. Expectedly, the CVS-Aetna deal has drawn high praise and consternation from a wide range of industry professionals.

CVS-Aetna merger supporters insist that consumers may enjoy lower prescription drug prices as a result of this consolidation. In a press release made shortly after the merger was approved, CVS Health President and CEO, Larry Merlo, said that “we’ll be able to offer better care and convenience at a lower cost for patients and payors.” Supporters allege that cutting out independent pharmacy benefit managers, the proverbial middlemen who negotiate drug prices with manufacturers and distributors, will cut costs and keep more money in patients’ pockets.

Additionally, proponents of this merger assured the Justice Department and consumers that this deal will increase access to health care and improve health outcomes for millions of Americans. Prospectively, CVS locations may offer a more comprehensive list of services previously reserved for individual and other institutional providers. In addition to prescription plans and flu shots, patients at CVS may soon be able to receive “care for everything from a sore throat to their diabetes,” which would have a significant impact on the nearly 95 million Americans that CVS Health provided prescription plans to last year. This prospect may be appealing to younger patients who, at least in other markets, value convenience, uniformity, and accessibility.

Notwithstanding the potential upsides of a formidable health care conglomeration, opponents of the CVS-Aetna merger are adamant that such consolidation means higher costs for consumers and limited options for care. One such opponent is the American Medical Association which described the merger as “anti-competitive,” and asserted insurers, not consumers, stand to benefit. Additionally, the CEO of National Community Pharmacists Association, Douglas Hoey, commented that “[f]or all of the talk about cost savings, prescription drug costs have clearly continued to rise despite previous vertical mergers like UnitedHealth’s 2015 acquisition of Catamaran…Moreover, the anticipated efficiencies CVS and Aetna tout may benefit the merged company more than the consumer, who is likelier to be driven to use health care resources chosen by the health plan rather than those of his or her own choosing.”

Skeptics also assert that parties to the merger are compelled not by patient health outcomes but rather by eventual competition and marginal benefits from streamlining operations. Critics are worried that the emerging trend of insurers having in-house pharmacy benefit managers, a possible feature of a CVS-Aetna conglomeration, will lead to profiteering and even less transparency in an industry plagued by special interest. While financial savings from the merger are likely, many worry that there is no apparent promise or enforcement mechanism which would ensure such savings are passed along to consumers.

The effects of the vertical merger between CVS Health and Aetna remain to be seen. In the coming years, patients may bear witness to a seismic shift in the health care landscape which begets greater access to care and lower costs for prescription drugs and treatments. It may be just as likely that consumers experience little to no change on these two fronts while increasingly dominant super-corporations stifle competition and sequester the would-be consumer savings. What is certain, however, is that mergers like this will increase in the immediate future as companies like Amazon and Wal-Mart continue to indicate competitive interest in the health care market. How the Justice Department, lawmakers, and consumers react could determine the future of health outcomes.

Leave a Comment

Filed under Uncategorized