The announcement that CVS plans to acquire Aetna for US$69 billion raises hope and concerns.
CVS operates 9,700 pharmacies and 1,000 MinuteClinics. A decade ago, it also purchased Caremark and now operates CVS/Caremark, a pharmacy benefits manager, a type of business that administers drug benefit programs for health plans. CVS/Caremark is one of the three largest pharmacy benefits managers in the United States. Along with ExpressScripts and OptummRXTogether, these three control at least 80 percent of the market.
Should American consumers be happy or concerned about the proposed merger? As a professor of health law and bioethics, I see compelling arguments on both sides.
Good for consumers, or for the companies?
CVS and Aetna assert they are motivated by a desire to improve services for consumers and that the merger will lower health care costs and improve outcomes.
Many industry experts have postulated, however, that financial gain is at the heart of the deal.
CVS has suffered declining profits as consumers turn to online suppliers for drugs. Reports that Amazon is considering entry into the pharmacy business raise the specter of increasingly fierce competition.
The merger would provide CVS with guaranteed business from Aetna patients and allow Aetna to expand into new health care territory.
The heart of the deal
The merger would eliminate the need for a pharmacy benefits manager because CVS would be part of Aetna.
Pharmacy benefits managers, which sprang up in the early 2000s in response to rising costs of care, administer drug benefit programs for health plans. Most large employers contract with pharmacy benefits managers that are different from their health insurers.
Nevertheless, a consolidation along the lines of a CVS/Caremark and Aetna merger would not be unprecedented. The nation’s largest health insurance company, United Healthcare, operates its own pharmacy benefits manager, OptumRx.
Pharmacy benefits managers process and pay prescription drug claims, negotiate with manufacturers for lower drug prices, and can employ other cost-saving mechanisms. They thus act as intermediaries between the insurer and pharmacies.
They also make a lot of money. They have been controversial in recent years for how they do so, allegedly keeping a keener focus on profits than on patients.
The merger has not been finalized and requires approval from government regulators, which isn’t always easy to get. In 2016 the U.S. Department of Justice sued to block two health insurer mergers: one between Aetna and Humana and a second between Anthem and Cigna. The government objected on antitrust grounds, arguing that the mergers would unduly restrict competition. Both efforts were abandoned.