In early December 2017, CVS Health Corp (NYSE: CVS) announced their decision purchase Aetna Inc. (NYSE: AET) for approximately $67.5 billion. Including Aetna's debt, the deal will be valued at $77 billion. With such a deal, CVS Health Corp will be able to expand its influence to "everything from insurance to the corner drugstore." According to executives of the two companies, the effects of this merger include the new ability to have one entity oversee patients' medical benefits and also their pharmacy benefits, enabling the entity to "better coordinate treatments for customers." But according to nonprofit commentators, CVS and Aetna have already had "ample opportunity to improve conditions for patients" in the past, so the current maneuver is motivated only by the desire to make "more money."
CVS's purchase includes paying $207 a share for Aetna, a 29% premium over the share price on the day before the companies opened negotiations, October 25. This merger is one of the largest healthcare mergers in the past decade: CVS is the largest American drugstore chain, and Aetna is the nation's third-largest health insurance company. CVS stands to benefit from having Aetna's 22 million customers go to CVS drugstores to fill their prescriptions via CVS's management of drugs-benefits plans for insurers and employers. According to the CEOs of the two companies, this merger will enable CVS to expand into "variety of retail medical services, from vision care to nutrition advice to audiology," thereby reducing the cost and inconvenience of attaining basic care for consumers. Some observers note that merging may help diminish many of the negative incentives that appear to be driving up prescription drug costs. But CVS's merger may result in a disaster for small drugstores, as CVS may steer Aetna customers towards their own pharmacies over local options.
The immediate benefits to this deal are projected to be relatively modest, with CVS banking on a more long-term scale of payoff. The deal was financed with a mix of cash and debt, totaling $49 billion of financing. However, the long-term benefits will likely create an approximation of "10,000 new front doors" for the health-care system and thus, an increased number of entry-points for healthcare at CVS stores and clinics.
American healthcare is hyper-fragmented and poorly coordinated. Many find the existing healthcare landscape "too convoluted, inefficient, and expensive." A monopoly might provide the benefit of "a better vertically integrated, less-siloed system," which could be a huge benefit for the system overall. Overall, the move was "about expansion...not contraction," according to CVS's CEO. It has created a new landscape in healthcare, which may trigger further rounds of takeovers amongst CVS and Aetna's competition. This competition belongs to a universe of independent drug plans, insurers, and supply-chain middlemen, including Cardinal Health Inc. (NYSE: CAH), and Walgreens Boots Alliance (NASDAQ: WBA).