News: CVS – Aetna Merger Approved

 

What was approved?

$69 billion merger between CVS Health & Aetna (the largest health insurance deal ever)

Who is Aetna? 

The nation’s third-largest insurance company. Aetna covers over 22 million people with its health plans. Senior Financial Group has over 500 clients on Aetna health insurance plans.

Who is CVS Health? 

Those red-logo pharmacies on every corner in town? The American retailer and health care company is the largest drugstore chain and prescription drug insurer in the US that serves over 5 million customers a day.

Revenues last year?

CVS: $185 billion, Aetna: $60 billion

When was the merger approved?

Yesterday – Wednesday, October 10th

Who approved it?

The Justice Department

Under what main condition?

The merger gets the green light under the condition Aetna sells its Medicare Part D prescription drug plan business in order to resolve anti-monopoly issues. Aetna agreed to sell its Medicare Part D prescription drug plan business to WellCare Health Plans, Inc.

What’s the goal?

There’s several. Overall, the primary goal is to use the immense amounts of generated data to turn more of CVS’s brick-and-mortar locations into “front-line clinics for basic medical services and patient monitoring.” The combination could help American consumers stick to medication regimens and stay out of the hospital due to improved patient/consumer relationships.

From a health care perspective, CVS wants to “assume the role of a health-care assistant” to work with consumers to help predict and prevent potential health problems before they occur. (See more.)

So, what are the concerns?

Initial concerns revolve around the impact this will have on consumer choice and the quality of their options. It’s a concern that this merger could leave Americans with fewer options and higher expenses, burdening them with less control over prescription drugs and medical care.

Companies like Cigna have recently taken over Express Scripts (a CVS rival), OptumRx (a major pharmacy manager) is owned by UnitedHealth Group, and Anthem (think BlueCross) is developing its own in-house pharmacy operation. These acquisition trends are concerning consumers and critics due to the market share power these few major players gain as a result. “The combination of CVS and Aetna creates an enormous market force that we haven’t seen before”, said Mr. George Slover, senior policy counsel for Consumers Union.

Not only is the impact on consumers a concern, but also the viability of smaller competitors in both the insurance and pharmacy space is at risk.

What do Aetna & CVS say?

They’ll be able to coordinate care for consumers more efficiently and control costs. Chief Executive of CVS Health, Mr. Merlo, says the merger approval “is an important step toward bringing together the strengths and capabilities of our two companies to improve the consumer health care experience.”

Why the enthusiasm?

Part of the enthusiasm of CVS’s acquisition of Aetna has been based on Aetna’s addition of a retail component. The potential of using CVS’s 1,110 retail clinics and close to 10,000 pharmacies to deliver care to Aetna customers could be a game-changer.

Are there management changes?

Mr. Larry J. Merlo (current chief executive officer of CVS Health) will be the chief executive of both combined companies, and Mr. Mark T. Bertolini (Aetna’s current chief executive officer) will step down and join the CVS board.

Mr. Merlo has expressed that “in our new health care model, we provide people access to more affordable care when, where, and how they need it. Care will be coordinated among the health care providers, caregivers, and their health care teams, leveraging the connectivity CVS will provide.”

When will it be finalized?

The merger is expected to be finalized before the end of 2018.


 

If you are an Aetna plan member and/or Senior Financial Group client and would like to discuss how this might impact you and your coverage, call our office at (865) 777-0153.

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