On Sunday, word came out about a seemingly unexpected merger. CVS, the pharmacy/convenience store chain, is outright purchasing Aetna, one of the biggest insurers in America, for $69 billion. So, why would they do this, and what does it mean for those of us who aren’t shareholders?
- Why does the store I buy gummy bears and aspirin from want to buy my health insurer? Contrary to what those notorious receipts will tell you, CVS’ big money-maker is filling prescriptions. But while CVS is the second biggest pharmacy in America, it’s also facing the retail industry’s boogeyman, Amazon, which is getting ready to fill your prescriptions. It needs an advantage, and owning one of the biggest insurers in the country is decidedly an advantage. At the same time, Aetna finds itself in need of growth, but it isn’t being allowed to merge with other insurers, so, hey, why not sell out to CVS?
- It’s not yet a done deal: While experts and lawyers don’t see many regulatory hurdles, this might still get spiked by the current administration. But this is, in financial terms, a “vertical” integration, since you don’t hit the Aetna store down the block and CVS doesn’t offer you insurance. Well, not yet, anyway.
- So am I about to get my insurance from CVS? That’s a good question. This deal is something of uncharted territory, and nobody quite knows how it’s going to unfold. One of the more obvious forms of “corporate synergy” is going to be that, yes, CVS will likely start offering insurance plans in every state it’s got a storefront (which is most of them), but it could go a lot deeper than that and fundamentally change how healthcare works.