CVS Health Corporation has picked up Aetna Insurance. The purchase price is $69 billion. The purchase is $207 per share. Breaking it down for Aetna stockholders it comes to $145 in cash and the rest in stock.
The announcement said the company will halt the growing cost of health care. The hope is to turn the 9,700 pharmacies and 1,100 mini clinics owned by CVS into community medical care hubs for primary care. Aetna has 22 million members who need those services and CVS can now send its customers to walk-in clinics for minor problems.
Advocates for consumers say this — like other mergers — makes it harder for smaller firms to do business and new companies to enter the market. It will now be increasingly dominated by large corporations.
The Justice Department will — no doubt — look into the merger which is called a vertical merger. That’s where two companies with two different lines of business in the same industry come together.
Aetna CEO Mark Bertolini disagrees with critics. He calls the merger a new front-door for health care in this country. “We want to get closer to the community, because all health care is local. What was going to draw people into an Aetna store? Probably not a lot. We looked for the right kind of partnership,” he said.
That partnership has CVS allowing pharmacists and nurses to monitor patients just out of the hospital and help them stay out. Hospital readmission is a high health care cost. The new community hubs will be wellness centers offering medical counseling, nutrition, vision, hearing and other benefits.
CVS CEO Larry Merlo agrees with Bertolini. “You can imagine a world where health care is better designed around the people who use it, which is one of the challenges we have today,” he said.
Both CEOs answer consumer advocate criticism by saying this is good for everyone. Insurers normally put a lot of obstacles in the way of consumers with high deductibles and doctor paperwork. Drug misuse is another insurance concern. The merger — the CEOs say — does away with that problem.
Consultant Dan Mendelson of Avalere Health said, “Every health insurance company wants to get closer to the consumer. If a patient is better off by getting a home health visit to have someone go through their medications to take them off 10 and eliminate those medications, I want that to happen — as opposed to someone just filling prescriptions.”
As part of the deal Bertolini will become a member of the CVS board and Aetna will run as a stand-alone business unit.
Here’s another angle to the story. You could now see even more mergers in health care. Pharmacy firms face potential new competition from Amazon and other web-based companies. Humana could be next up and experts say it is a target of either Walgreens or Walmart.
The shareholders still have to approve the merger and if approval is made, the sale will finalize in early 2018.
Source links: The Washington Post, MSN