Less choice, higher prices are feared
CVS’s purchase of Aetna could be first domino to fall.
CVS Health says that its planned $69 billion takeover of insurance giant Aetna would be good for consumers. That, of course, is unlikely.
For the deal to benefit consumers, it would have to result in lower drug prices or lower insurance costs. If past experience is anything to go by, this won’t happen.
“You don’t need a crystal ball to predict the future here,” said David Balto, a health care advocate and former policy director for the Federal Trade Commission.
Such deals “have a dismal history,” he told me. “They lead to less consumer choice and more exclusionary conduct. Consumers suffer by paying more and getting less choice for the vital drugs they need.”
We’ve seen drugstores merge with drugstores, and insurance companies with insurance companies, but this is the first time a drugstore is taking over a health insurer.
Adding another wrinkle, CVS also runs CVS Caremark, a prescription benefit manager that negotiates on behalf of insurers and employers in securing the lowest possible drug prices from manufacturers and retailers.
If it sounds like all these health care enterprises are pulling in different directions, you’re right.
Aetna wants to save a buck for its policyholders by driving drug prices down. CVS Caremark wants to help them do that by obtaining rebates from manufacturers, but it wants a portion of those rebates for itself.
Pharmacy operator CVS, meanwhile, wants to sell as many drugs as possible at the highest possible price.
Stir all that together and you get a goulash of conflicting goals and incentives, none of which seem destined to benefit patients.
“I would never underestimate cynicism over a deal such as this,” said Joel W. Hay, a pharmaceutical economist at the University of Southern California. “CVS and Aetna have to prove this will benefit anyone but shareholders.”
If the combined companies wanted to put patients ahead of profits, however, he said this could be “a golden opportunity for a fully inte- grated strategy” that uses expa n ded resources to improve health care offerings.
“PBMs and drugstores don’t care about patient outcomes _ they just want to sell drugs,” Hay said. “An insurance company is interested in the outcome. Theoretically, this deal could be a way to put it all together.”
That’s the way CVS and Aetna are spinning it.
The two companies are envisioning a world where their pooled capabilities mean a complete reinvention of the U.S. health care system, with patients enjoying unparalleled access to effective and affordable treatment.
“This is a natural evolution for both companies as they seek to put the consumer at the center of health care delivery,” CVS and Aetna said in a statement.
Taking the PR jargon up a level, they declared that the deal represents “a better opportunity to utilize local care solutions in a more integrated fashion with the goal of improving patient outcomes.”
I have no idea what that means either. But I do note that CVS now describes itself not as a drugstore chain but as “a company at the forefront of changing the health care landscape.”
And Aetna is no longer an insurer. It’s now “one of the nation’s leading diversified health care benefits companies.”
So this is serious stuff. To be sure, there could be positive developments. CVS suggested that its network of in-store Minute-Clinics could expand in number or functionality. This potentially would allow people to interact with nurse practitioners rather than pricier doctors, thus offering more reasonable care for routine medical issues.
Yet I can’t help but think of how banks pitched the advent of ATMs as a boon for customers, allowing them easier and cheaper access to financial networks. Once customers got used to the idea, fees started rising.
The most likely driver for this deal is that CVS wants Aetna’s 45 million policyholders, a number that includes medical, dental and pharmacy coverage.
In other words, who knows? The only safe bet at this point is that the CVS-Aetna deal, if it wins regulatory approval, almost certainly would prompt Walgreens and Wal-Mart to seek similar tie-ups with insurers.