CVS has been reported to be in engaged in talks for the purchase of Aetna in what I would describe as movement toward vertical healthcare integration (see: CVS Is Said to Be in Talks to Buy Aetna in Landmark Acquisition). Below is an excerpt from this article:
CVS Health, the giant drugstore chain that also runs walk-in clinics and a pharmacy benefit business, is in talks to buy Aetna, one of the nation’s largest health insurance companies, according to people briefed on the talks....[I]f consummated, the deal could be worth more than $60 billion based on Aetna’s current market value, which would make it one of the largest corporate acquisitions this year and one of the largest in the history of the health industry. The proposed combination reflects the blurring of traditional boundaries in health care, as established companies seek to find their footing in a rapidly changing environment....The negotiations are also taking place as the online retail giant Amazon encroaches on the turf of well-established players — and the pharmacy business could be next....A larger company — CVS and Aetna have combined annual revenues of about $240 billion — could enjoy greater leverage in negotiations with drug companies, helping it defend itself against newcomers like Amazon.....CVS, which reported revenue of $177.5 billion for 2016, is based in Rhode Island and opened its first store in 1963. It became a billion-dollar company in 1985. ....[I]t is also one of the nation’s top three pharmacy benefit managers and operates one of the country’s biggest specialty pharmacies, which sells high-priced drugs that often require special handling. The company also runs walk-in MinuteClinics in its pharmacies and Target stores around the country.
Here is what David Chou thinks about this potential merger copied from his LinkedIn feed (David Chou on LinkedIn):
CVS's proposal to acquire Aetna is a big shift towards the direct to consumer model. This will change the landscape tremendously in healthcare if the deal is approved. Below are my predictions:
1 - CVS will aggressively partner or affiliate with major health systems to provide clinic access along with the retail pharmacy services.
2 - CVS will provide healthcare service memberships directly to consumers for care at the retail clinics. How will this model impact the revenue for traditional health systems?
3 - We will see an increase in higher deductible plans as CVS becomes a payer, while the health systems shift the lower acuity care to the outpatient setting at the CVS clinics.
4 - CVS will increase their market share in the PBM (pharmacy benefit management) space. Will they increase their momentum in specialty pharmacy?
From a business strategic perspective, this merger seems to have a lot going for it. The merged company would be a major player in four healthcare sectors: (1) retail pharmacy chain; (2) major provider of first-tier healthcare clinical services with MinuteClinics established in approximately 1,100 locations in 33 states and the District of Columbia (see: MinuteClinic) (3) major pharmacy benefits manager (PBM); and (4) major health insurance company.
I agree with David Chou that the merged entity would be able to offer appealing "membership services" including nurse, or eventually physician, visits at retail clinics, prescription drugs at lower prices, and health insurance. The higher profile MinuteClinics would definitely offer enhanced EHR support with hospital interfaces. Such EHR data would also be of great interest to the health insurance arm of the business. Because the MinuteClinics will offer a substitute for many current hospital ER visits, CVS will be in a position to generate referrals to neighboring health systems for patients in need of higher level care. I am sure that part of the future plan will be an enhancement of point-of-care lab testing with initial lab test results accompanying hospital transfers for the more seriously ill. Meanwhile, these health centers will also act as patient service centers for one of the two national reference labs, Quest and LabCorp (see: National Reference Labs Expand Their PSC Footprint in Groceries & Retail Pharmacy).