CVS-Aetna: an answer to a broken system

Chain Drug Review, News

All indications are that CVS Health’s $77 billion acquisition of Aetna is on track to be finalized by the end of the year. The transaction has won the approval of shareholders at both companies, and the management team for the combined organization has been named, even as the government’s review of the deal has proceeded as ­anticipated.

The merger is not, however, without detractors, who argue that the vertical integration of a dominant player in the pharmacy business with one of the nation’s biggest health insurers would result in an entity with too much power to shape the marketplace. They contend that once CVS has taken control of Aetna, the company would be in a position to steer patients away from rivals to utilize its services, thereby limiting competition.

The new company will, indeed, have an unprecedented array of assets. CVS, which before the merger characterized itself as a pharmacy innovation company, operates more than 9,800 drug stores across the country, 1,100 walk-in medical clinics, a PBM serving 94 million plan members, a pharmacy care business that serves a million seniors, a Medicare PDP and a growing suite of services around specialty medications. For its part, Aetna administers insurance plans for some 45 million patients and offers medical management capabilities, Medicaid management services, worker’s compensation programs, and health information technology products and ­services.

The economic theory underpinning U.S. antitrust law would seem to indicate that it is not good to concentrate too much power in the hands of a single entity. But that position is based on the assumption that robust competition will deliver the benefits of quality products at a reasonable cost to consumers. That is clearly not the case when it comes to health care.

The United States now spends $3.6 trillion a year on health care, more than twice as much per capita as any other nation. And the results, as measured by such criteria as longevity, infant mortality and incidence of chronic disease, are worse than those in other advanced economies. Something is very wrong, and new approaches are required.

The merger of CVS and Aetna represents an attempt to alter the broken paradigm. “Today’s health care system has become increasingly fragmented and complex for consumers to navigate and afford,” says Larry Merlo, president and chief executive officer of CVS Health. “And without true innovation, more Americans will simply be without health care in the future.” In addition to adversely affecting people’s well-being, the steadily rising cost of health care, which already accounts for almost 20% of gross domestic product in the U.S., will leave little funding for other urgent priorities.

By extending the continuum of care and ensuring that services are delivered in the most convenient and efficient manner possible, consistent with what’s right for the patient, CVS and Aetna intend to make a positive impact on the issues of access, quality and cost that continue to plague the health care system.

The treatment of diabetes is a good example of how the merged company will work. Caring for the 30 million people in this country who suffer from the disease (not to mention the many millions more who are prediabetic) costs some $245 billion a year. Under the new, expanded CVS Health model, patients will benefit from counseling at a store-based health hub — a format designed to make a wealth of health and wellness services, information, and expertise available in the communities where people live and work — as well as remote monitoring of their condition. In addition, patients will have access to programs designed to help them control their condition through weight loss and better nutrition.

“These types of interventions are things that the traditional health care system could be doing, but it lacks the key elements of convenience and coordination that help to engage consumers in their health,” Merlo said at the time the merger was announced late last year. “That’s what the combination of CVS and Aetna will deliver.”

In many ways that vision represents a bold departure from the way health care is now delivered. Like any undertaking of such scope and ambition, there’s no guarantee that it will work or that it won’t produce unintended consequences. But with millions of patients still struggling to obtain regular access to quality health care and costs that threaten the nation’s financial stability, the nation can’t afford to pass up an opportunity to make the system more efficient and effective.

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