CVS announces
Bid could help drugstore chain become 1-stop health care giant
it has agreed to buy Aetna in a $68 billion deal that combines a drugstore chain with a health insurer.
CVS will buy insurance giant Aetna in a roughly $69 billion deal that will help the drugstore chain reach deeper into customer health care and protect a key client, the companies announced late Sunday.
CVS Health Corp. will pay about $207 in cash and stock for each share of Aetna Inc. That represents a 29 percent premium to the price of Aetna shares on Oct. 25, the day before The Wall Street Journal first reported about the possibility of a deal.
The mammoth acquisition pairs a company that runs more than 9,700 drugstores and 1,100 walk-in clinics 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 insurance companies, including Aetna.
The merger would allow CVS to provide a broad range of health services to Aetna’s members and further decrease the drugstore titan’s reliance on the retail sales that have faced increasing competition.
And the deal is likely to set off even more mergers in the health care industry, which has been undergoing consolidation and faces potential new competition from Amazon. It will also position Aetna to be more competitive with UnitedHealth Group, an insurer that has expanded outside of its core business into pharmacy care services, clinics, surgery care centers and health care data.
“I think it will create more consolidation among the insurers and retailers, blurring the lines,” said Ana Gupte, an analyst at Leerink Partners, who recently pointed to retail giants Walgreens Boots Alliance and Walmart as potential “dark horse acquirers” of the health insurer Humana.
Wall Street analysts have said the deal could lower health spending — if, for example, CVS can push customers to use walk-in clinics instead of emergency rooms for minor problems. But consumer advocates argue the deal would limit choice and could make it harder for new firms to enter a market increasingly dominated by behemoth companies.
Even before the announcement, the drugstore chain was a dominant player in the big business of negotiating drug prices for insurers and employees. The merger would give CVS an even broader role in managing health care.
The deal could generate a new stream of customers to CVS stores, many of which now offer a growing menu of medical services in addition to the usual fare of prescriptions and over-thecounter supplies.
That could help fuel a push by CVS to become more of a one-stop-shop for health care.
CVS Health started adding clinics to its drugstores years ago and has been expanding services. Customers can get physicals, flu shots or treatments for sinus infections. They also can receive cholesterol screenings or find help monitoring chronic conditions such as diabetes.
Analysts say that clinics aren’t especially profitable but that they draw people into the stores.
The deal also will would help CVS keep Aetna’s business managing the insurer’s pharmacy benefits. That could keep millions of customers away from Amazon if the retail giant decides to expand into prescription drugs. Investors have considered that prospect since reports about the possibility appeared this year.
Antitrust regulators must approve the CVS/Aetna deal, and that is not guaranteed. Just last month, the Justice Department sued to block AT&T’s $85 billion purchase of Time Warner. Regulators also sued to stop Aetna’s proposed $34 billion purchase of Humana Inc. Opposition from antitrust regulators also helped kill Anthem Inc.’s $48 billion bid to buy Cigna Corp.