CVS Health-Aetna deal may mean more services
CVS Health wants to do much more than fill your prescription or jab your arm with an annual flu shot.
The second-largest U.S. drugstore chain is buying
Aetna, the third-largest health insurer, in order to push much deeper into customer care.
The evolution won’t happen overnight, but in time, shoppers may find more clinics in
CVS stores and more services they can receive through the network of nearly 10,000 locations that the company has built.
“They’ll be pretty much a soup-to-nuts health company … except for the hospital part of it,” said Craig Johnson, president of Customer Growth Partners, a retail consulting and research firm.
Patients also may find the CVS-Aetna combination much more involved in managing their care, especially for those with expensive chronic conditions such as diabetes. The bulked-up company also may gain more negotiating leverage over prescription drug prices, but it’s far too early to say how much or whether that benefit will trickle down to customers.
The $69 billion deal announced Sunday evening will push the drugstore chain more
forcefully in a direction it has been heading for years, according to Wall Street analysts. The company, which stopped selling tobacco products in 2014 to further burnish its image as a care provider, already runs about 1,100 clinics and has been steadily expanding the health care it offers.
The clinics started as a place to treat basic health care needs such as sinus infections or strep throat. Gradually, CVS added services such as blood draws or monitoring of chronic conditions such as high blood pressure and diabetes. Expect that trend to continue as the drugstore switches more from selling products in its stores to services that can’t be bought online, where retailers face formidable competition from the likes of Amazon.
“I think over time you’re going to see less of that front store retail and more health care services in their stores,” said Jeff Jonas, a portfolio manager for Gabelli Funds who follows drugstores.
The mammoth acquisition pairs a company that runs more than 9,700 drugstores with an insurer covering around 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 clients such as large employers and insurers including Aetna Inc.
Analysts say the combined company could add more clinics and expand in-store services to include eye care or maybe centers for hearing aids. That could gradually turn CVS into a one-stop-shop for health care, a place where patients can get a hearing aid checked, then see a nurse practitioner and pick up prescriptions.
“If you think about it, we actually don’t have anything like that,” said Jefferies analyst Brian Tanquilut said.
Clinics aren’t especially profitable, but they are important because they draw people into the stores and help build deeper customer relationships, analysts say.
The clinics have become an attractive option for customers in need of basic health care because they are usually open longer than the family doctor’s office. A clinic visit also can be cheaper than a $100 doctor visit for someone who doesn’t have insurance, but they have drawbacks. Family doctors say they know their patients better and can check on their overall health during a visit rather than dealing with just the one issue that brought that person in.
Some CVS shoppers also are skeptical about getting their health checked in a retail store.
Jessy Tatenco, 23, buys household items and overthe-counter medications for his three children at CVS. But he said would be reluctant to get medical services there. He feels more comfortable in a doctor’s office or traditional clinic setting.
“I wouldn’t trust them with my health care. They sell toys,” he said after leaving a CVS store Sunday in downtown San Diego.
CVS isn’t the only health care giant delving into clinical care. The deal will help it compete with others like United-Health Group Inc. The nation’s largest health insurer also runs clinics and doctor’s offices. Like CVS, it also has one of the nation’s largest pharmacy benefit management businesses.
CVS and Aetna also want to go beyond just clinic visits to help patients and customers.
Aetna Chairman and CEO Mark Bertolini has talked frequently about how most of a person’s life expectancy is determined by genetics and location and not by clinical care, which is where health care spending is focused.