- CVS' CEO and CFO laid out examples for how consumers and shareholders could benefit from the proposed merger with Aetna during a recent investor meeting hosted by Mizuho Securities. Mizuho analysts said investors have been interested in the "long-term merits" of the deal, which is expected to achieve $750 million in cost savings in the second full year after closing.
- Executives described how they could use its existing services to better serve Aetna's members. As soon as the deal closes, if it does, CVS believes it will have immediate access to 20% of Aetna's membership currently using the stores. That matters because CVS believes its pharmacists play a crucial role in shaping a patient's overall behavior. CVS said many investors underestimate the role of the pharmacist.
- For example, if a diabetic patient who is also an Aetna member comes to CVS to fill a prescription, the pharmacist can remind the customer that they are due for an A1C test. That test could also be performed in a CVS clinic. CVS estimates that the pharmacist averages 12 interactions with diabetic clients annually, more than the four interactions a diabetic patient has with their regular physician.
The nearly $70 billion deal is expected to go through, particularly after the Department of Justice last week said it won't challenge the other pending megamerger of Cigna and Express Scripts. Analysts have said that tie-up is crucial as payers try to rein in spending on costly specialty drugs. The two huge deals highlight the growing trend of healthcare companies vertically integrating to combat headwinds including softening patient admissions and ever-rising healthcare costs.
CVS and Aetna have made bold claims that together they can "remake the consumer health care experience." The comments to investors shed some light on how they plan to execute on that vision. CVS CEO Larry Merlo and CFO David Denton also weighed in on the controversy over rebates and the proposed rule out of Washington that could alter how they're used.
However, when it comes to the hot topic of rebates, Mizuho analysts said the risk from Washington may not be that great. "It was evident to us on the roadshow that CVS's disclosure that rebates only account for 3% earnings significantly de-risked the stock," according to the note.
Still, Mizuho cautioned that changing how the rebates are used could affect Medicare Part D members and contribute to a rise in premiums. "If the rebate is removed or shifted to the point-of-sale, premiums for Medicare Part D beneficiaries will rise," they said, adding that any change that resulted in higher premiums for Medicare beneficiaries would face significant pushback on the Hill.
As the companies hope for clearance from the DOJ, the executives did not provide any more detail on how many Medicare Part D plans may need to be divested to ensure approval from antitrust regulators.