What Does The CVS/Aetna Merger Mean For You?

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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.

  • You likely will get bugged to go to the doctor a lot more: CVS runs “minute clinics” in quite a few of its locations, mostly places where you can get a cold treated, get your flu shot, and otherwise get day-to-day medical stuff at a cheaper price (and more discreetly, in some cases) than going to an emergency room or a hospital. Your insurer loves the idea of preventative medicine, that is, find something that might be a severe problem before it gets nasty and also expensive to treat, so CVS will likely put that front and center. It already has, in some ways: The chain stopped selling tobacco and started encouraging its customers to quit in 2014.
  • It’s about to set off a massive fight over drug prices: One of the bigger questions is whether CVS can leverage this to drive down drug prices. That’s one of CVS and Aetna’s main selling points for the merger; since they pay for the doctor who writes the prescription and the store that fills that prescription, they would have the potentially enormous clout to drive down the cost of drugs. The main question is whether CVS would pass on those savings to consumers, and just how they’d do that. And, of course, there’s the question of where Amazon might jump; if America’s most notorious ecommerce price-cutter decides to rumble, things will get interesting fast.
  • It could also be a bad thing: Again, the territory here is hazy, but CVS could just as easily force everyone with an Aetna plan to get their prescription via CVS’s counters, start mining your medical records to put embarrassing personal data on those receipt coupons, or deliberately drive every other insurer out of a market by undercutting them and then start forcing up prices. Or, heck, why not just make anybody who gets an Aetna plan, and many people have them through their employers, part of a walled garden where all their medical care has to come from CVS and Aetna companies? Or, for that matter, why not just charge your employer more for everything instead?

As mentioned already, there’s a lot of unanswered questions here. The biggest takeaway is that this is new, unexplored territory for the entire healthcare industry and nobody, not even Aetna and CVS, quite know how it’s going to shake out. There’s reason to be optimistic, but also nervous, and we’ll just have to see how it comes together.