Shares of CVS Health Corp tumbled on Friday with other drugstore chains following a report that it could acquire insurer Aetna Inc to fortify itself against a possible Amazon Inc entry into the sector.
CVS Health has offered to buy Aetna for more than US$200 per share, the Wall Street Journal reported late on Thursday, citing people familiar with the matter.
The newspaper described the talks as serious, but said they might not lead to a deal.
Shares of CVS Health lost 5.9 percent, while Aetna dropped 3.9 percent.
A merger of CVS and Aetna would create a healthcare behemoth and put huge pressure on standalone players such as Express Scripts Holding Co and Walgreens Boots Alliance Inc. Express Scripts would become the last major standalone pharmacy-benefit manager (PBM) not allied with a major insurer.
Under a combined roof, the insurance arm of CVS-Aetna could help keep costs down by routing patients needing basic urgent care to CVS-owned walk-in clinics and keeping them out of expensive hospital emergency rooms, Mizuho Securities Co analyst Ann Hynes said in a note to clients.
The company would also become a formidable competitor to UnitedHealth Group Inc, the biggest health insurer and owner of its own PBM unit, OptumRx.
CVS and Aetna declined to comment.
The possible deal comes amid signs that Amazon.com Inc is preparing to expand into pharmacy distribution.
A report in the St Louis Post-Dispatch said Amazon, which has disrupted the grocery business with its US$13.7 billion acquisition of Whole Foods Market Inc, had obtained licenses in 12 states to become a wholesale pharmaceutical distributor.
“While these licenses do not seemingly permit [Amazon] to act as a dispensing pharmacy, it does allow it to deliver relevant pharmaceutical and medical products to pharmacies,” Credit Suisse Group AG said in a note.
“We can only speculate as to what Amazon’s next steps may be,” the note added. “While we acknowledge the inherent challenges and complexities of the supply chain, the specter of Amazon continues to weigh on sentiment across our universe of distributors, pharmacies, and [pharmacy benefit managers].”
CFRA Research analyst Joe Agnese said Amazon’s move was the “big threat for the sector right now.”
Additional reporting by Bloomberg
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