Drugstore operator CVS is making a US$69 billion offer for insurer Aetna as it tries to position itself as a one-stop shop for US healthcare needs with prescription drugs, clinics and insurance plans to cover those goods and services.
The companies on Sunday announced that CVS Health Corp is to pay about US$207 in cash and stocks for each share of Aetna Inc, a 29 percent premium over Aetna’s stock price before the first report about a possible deal in October.
The mammoth acquisition pairs a company that runs more than 9,700 drugstores and 1,100 walk-in clinics with an insurer covering about 22 million people. CVS Health Corp is also one of the nation’s biggest pharmacy benefit managers, processing more than a billion prescriptions a year for insurance companies, including Aetna.
The companies planned to have a morning conference call yesterday to discuss the deal.
The deal’s effect on prescription drug prices is uncertain. Aetna customers could first see some changes in how their plans are managed. Over time, a bulked-up CVS might gain more negotiating leverage over prices, but it is difficult to say how much would trickle down to customers.
The deal could generate a new stream of customers to CVS stores, many of which now offer a growing menu of medical services in addition to the usual fare of prescriptions as well as cold and flu supplies.
That could help fuel a push by CVS to become more of a one-stop shop for healthcare, a place where patients can get blood drawn, then see a nurse practitioner and pick up prescriptions.
By acquiring Aetna, CVS can enter new businesses including health savings accounts, home care and telemedicine and go after more of the consumer’s healthcare dollars, RBC analyst George Hill said.
With traditional lines blurring in healthcare, CVS must worry about competition from the likes of UnitedHealth Group Inc. The nation’s biggest health insurer also manages a large pharmacy benefits business, and it runs doctor practices and clinics.
CVS and Aetna together “have the chance to close the competitive gap quickly,” Hill said. “You can see the path where CVS is going.”
CVS Health started adding clinics to its drugstores years ago and has been expanding the services that they offer. Customers can get physicals, flu shots or treatments for sinus infections at the clinics. They also can receive cholesterol screenings or find help monitoring chronic conditions such as diabetes.
Analysts say clinics are not especially profitable, but they are important because they draw people into the stores and help build deeper customer relationships.
The clinics also provide services that cannot be purchased online. Like other retailers, drugstores are struggling to hold onto customers who are buying more goods through outlets such as Amazon.
By expanding its medical services, CVS would essentially be “replacing aisles and products with services,” Jefferies analyst Brian Tanquilut said.
Tanquilut and others on Wall Street expect the Aetna deal to fuel a healthcare services expansion for CVS. The company might open more clinics or add services such as eye care or hearing aid centers.
The deal also would help CVS keep Aetna’s business managing the insurer’s pharmacy benefits. That could keep millions of customers away from Amazon if the retail giant decides to expand into prescription drugs. Investors have been worried about that prospect since reports about the possibility first appeared earlier this year. Amazon has not commented.
Aetna stockholders would get US$145 cash and 0.8378 CVS shares for each Aetna share. They would own 22 percent of the company, with 78 percent remaining with current CVS shareholders.
Antitrust regulators still need to approve the deal, and that is not guaranteed.
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