'Nowhere to hide' for rivals after blockbuster CVS-Aetna deal
CVS Health's nearly $70 billion acquisition of Aetna, which got a nod from antitrust regulators Wednesday, is expected to push the industry toward becoming more consumer focused, potentially ease access to care and pair pharmacy data with medical benefit data — all in the hopes of achieving better outcomes and lower costs.
With a deal that's nearly unprecedented in scale for the industry, experts weighed in on the key takeaways and how executives around the sector should view the changing landscape.
Threat to providers
Insurers are seeking better engagement with members to allow them to intervene when health conditions arise. By teaming up with CVS, Aetna is in a better position to do just that, experts told Healthcare Dive.
That's because, for a majority of Americans, a CVS is just around the corner. According to the pharmacy giant, nearly 76% of the U.S. population lives within five miles of a CVS store. As the merging companies have said, they want this deal to represent America's "front door" to health care. With CVS' Minute Clinics and pharmacists, the two expect to be significant players in providing care.
"Everyone waking up tomorrow in healthcare has to say to themselves, 'What role do we have to play to improve quality, bring costs down and collaborate with suppliers?'" David Friend, managing director at BDO, told Healthcare Dive. With the proximity most Americans have to CVS and its clinics, there's "nowhere to hide even if you're a small regional player," he said, adding that most consumers want easier access to the system that has been historically among the least consumer friendly.
The deal also poses a threat to providers as it may increase access to clinical pharmacy services, Lindsay Conway, managing director at the Advisory Board said.
"Therapy is an increasingly important strategy for managing complex and chronic disease patients, and pharmacists are ideally-positioned to provide medication therapy management (MTM). Yet in a fee-for-service environment, most health systems are unable to provide robust MTM, the absence of which contributes to avoidable complications, non-adherence, and sub-optimal patient outcomes," Conway wrote Wednesday.
Unprecedented scale has potential to achieve lower costs
The acquisition brings together two giants in the healthcare system. Together they will operate more than 9,700 retail locations, more than 1,100 walk-in medical clinics and a PBM with nearly 90 million members. They will also operate a health insurance plan that serves nearly 45 million Americans.
While the physical footprint is important, so too is the amount of actionable data the two have together. Together, the companies will be able to share data from both the medical benefit and pharmacy benefit, providing a complete picture of members' health status.
The deal also represents the crumbling of silos in healthcare and the potential to unleash data that can improve health and ultimately lower costs.
"Health plans need to know how their members are doing to intervene if something seems awry. Pharmacy data present some of the most accurate information on how members are adhering to a care plan," Rachel Sokol, practice manager at the Advisory Board, said.
Nearly a decade ago, the medical cost trend was in the double-digits, and now it's in the single-digits, Dean Ungar of Moody's told Healthcare Dive. While there are a lot of pieces to be managed to achieve cost savings through this deal, Ungar said, "They are, I think in my mind, well-positioned to be part of the solution."
But the deal is not without risks or doubters.
CVS initially said it would take on $49 billion in debt to finance the transaction.
In March, Moody's said it placed CVS on review for a downgrade following its proposed use of $40 billion in unsecured notes.
At the time, Moody's Vice President Mickey Chadha said the transaction "will result in significant weakening of CVS' credit metrics as it will be financed with a large amount of debt and will come with high execution and integration risks."
While integration of this scale does pose a challenge, one benefit is that the two companies are not traditional competitors, Friend said. In other situations when a PBM acquires a rival PBM, it creates an inherent winner or loser inside the combined company, he said.
While it's not a slam dunk, he said, the combined company has a decent shot at taking a "commanding lead" in the industry should execution go well.
And consumer advocates, the American Medical Association and some state officials are not convinced the deal will be good for them. The AMA and officials in New York, California and Connecticut were among those skeptical, citing studies finding merger savings rarely if ever trickle down to consumers.
"Market consolidation benefits big business’ bottom line at the expense of seniors’ pocketbooks," California AG Xavier Becerra said in a statement.
"We know that over consolidation is bad for healthcare and leaves millions of Californians with fewer options. We will keep close watch to ensure that the terms of this settlement are met.”