The announcement this past Sunday that CVS Health will move forward with plans to acquire Aetna, the United States’ third largest health insurer, marks the largest healthcare M&A transaction in 2017. The $69 billion deal is also historic in that it would bridge a healthcare benefits company with a drugstore giant for the first time, a move that the two companies say will make healthcare costs more manageable for both of their clients.
According to a joint statement from CVS and Aetna, “This transaction fills an unmet need in the current healthcare system and presents a unique opportunity to redefine access to high-quality care in lower cost, local settings whether in the community, at home or through digital tools.”
The news comes at a time of industry unrest—the result of ballooning medical and prescription costs, the Republicans’ looming tax plan and an uncertain future for the Affordable Care Act and government programs like Medicare—leading more consumers to take responsibility for their healthcare. Aetna and CVS, both headquartered in New England, say these consumers will benefit from a transaction that melds Aetna’s data and analytics with CVS’s local, human touch. Their merger, they say in their statement, will ensure that the two companies are better positioned to meet the health needs of the 50 percent of Americans with chronic conditions who account for more than 80 percent of all healthcare costs.
In the days since the announcement, media, investors and industry players have scrambled to predict what the merger would mean for the future of the healthcare industry and for primary care physician practices in particular. Healthcare DIVE calls it “the kind of deal that can upend an industry” while one Forbes contributor says it’s a “mortal threat to U.S. hospitals.” Moody’s has said that together the two companies will have “unsurpassed scale and reach in the industry and the potential to reshape the entire health plan market.” The New York Times said that the transaction “reflects the increasingly blurred lines between the traditionally separate spheres of a rapidly changing industry.”
Mark T. Bertolini, who is Aetna’s CEO, told the Times that by gaining access to CVS’s 9,700 CVS Pharmacy locations and 1,100 MinuteClinic walk-in clinics, Aetna will be better able to reach consumers by creating destinations for care. “It’s in their community. It’s in their home,” he said. “CVS has the draw. People trust their pharmacist.”
“We think of it as creating a new front door to healthcare in America,” said CVS Health’s CEO Larry J. Merlo.
Aetna serves an estimated 44.6 million people, while CVS Health claims nearly 90 million plan members through its pharmacy benefits manager.
The proposed acquisition must now face the federal government’s antitrust reviews. As a financial services executive told Fortune, “Given the prolonged regulatory process, we do not expect any changes (if any) in the competitive landscape until the 2020 coverage plan year.”
For more on the state of the healthcare industry, read why the latest healthcare reform defeat shouldn’t be a distraction from companies’ health benefits strategy.