How Big Healthcare Mergers Like CVS and Aetna Could Affect You
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If there's one certainty in the healthcare industry now, it's that you'll see more mergers. Whether this is good for consumers is much less certain.
The latest sign of this shift came this week when CVS Health announced an agreement to buy insurer Aetna for $69 billion. The deal would bring together CVS’ 9,700 pharmacies, its 1,100 walk-in Minute Clinics, and the 22 million members of the nation's third-largest health insurer.
Many companies involved in these mergers promise better healthcare and lower prices. But some advocates see the potential for fewer choices when consumers shop for healthcare.
Some rivals of CVS and Aetna already have cut their own deals. Aetna insurance rival UnitedHealthcare owns OptumRx, which, like CVS, manages the pharmacy benefits for insurance plans. Hospital chains are also merging, with some running their own walk-in clinics. Amid all this, online retail behemoth Amazon is rumored to be getting into the pharmacy business.
“We’re seeing consolidation in the healthcare delivery system at a rapid pace,” says Thomas Dennison, a professor at Syracuse University and director of its Lerner Center for Public Health Promotion. “When you’re bigger, you have more leverage to negotiate prices.”
Dennison says consumers are frustrated with the fragmented healthcare system today and CVS is trying to capitalize on that by making medical services more convenient and at a lower cost.
Consumer out-of-pocket costs are lower when they go to a retail clinic and significantly less than a hospital emergency room, according to a study by Blue Cross and Blue Shield.
If the deal is approved by regulators and shareholders, CVS said it will transform its stores into community healthcare hubs where people can go to get a broader array of medical services beyond flu shots, filling prescriptions, treating ear infections and other basic services that its Minute Clinics offer today.
The companies envision offering lab tests, vision and hearing services, weight loss and nutrition counseling, follow-up nursing care at home and medication management. CVS CEO Larry Merlo said after announcing the deal that people with chronic conditions, like high blood pressure or diabetes, could go to their local CVS for regular monitoring in between doctor visits, which would help keep them out of the hospital and prevent more costly problems down the road.
“Helping people manage their health with better monitoring of chronic conditions could potentially lower the cost of care needed,” says Dan Mendelson, president of Avalere Health, a healthcare consulting firm.
The merger also could give CVS more power over prescription drug costs. A pharmacy benefit manager like CVS is typically the middleman between drug companies and insurance plans and therefore doesn't have an incentive to negotiate prices. But a pharmacy benefits provider and health insurer combined has the motivation to focus on those costs, says Mendelson.
But some consumer advocates and antitrust experts are skeptical that consumers will reap any cost savings from this merger and say that continued consolidation in the healthcare marketplace only hurts consumers.
“The health insurance and retail pharmacy markets are already highly concentrated, with just a few big insurers and pharmacies dominating,” says George Slover, senior policy counsel for Consumers Union, the policy and mobilization division of Consumer Reports.
He says the combination could lead to fewer choices for consumers if CVS favors Aetna policyholders over those on other health insurance plans by offering them better deals, or if Aetna pressures its members to obtain their prescription drugs at CVS.
Big mergers have a poor track record of delivering lower prices to customers, says Diana Moss, president of the American Antitrust Institute, a nonprofit that does research and advocacy on antitrust issues. “There are no guarantees that any cost savings realized will be passed onto consumers.”
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