After weeks of speculation, CVS Health announced on Sunday its decision to purchase Aetna, one of the nations largest health insurance companies, for $69 billion dollars. The merger of the two companies signals a start of a new era in the healthcare industry that has already been changing at a rapid pace. According to CNN, the deal is seen as one of the largest in healthcare, surpassing the acquisition of Medco by Express Scripts in 2012. Larry Merlo, the CEO of CVS Health, stated in an interview that “We think of it as creating a new front door to health care in America,”
The groundbreaking deal came at a time of anticipation that Amazon would enter the pharmacy market, a move that would shake the healthcare industry for Pharmacy Benefit Managers (PBM’s) like CVS Health. Amazon in the past has had the ability to become the leader in various different markets, such as shopping for household and grocery items as well as books, music, and content streaming. According to reporting by the New York Times, there is a high probability that Amazon will enter the market however it’s unknown when their move will occur and how aggressive they might be is also unclear. The acquisition of Aetna by CVS is largely speculated to be a move based on Amazons possible but unconfirmed entry into the business.
Aetna made an attempt to merge with another leading health insurance company, Humana, in June of 2015. The merger of $37 billion was blocked by a Federal Judge earlier in 2017 as it was seen to lack the best interest of the consumer by limiting competition. After the block, NPR reported that Aetna agreed to pay Humana $1 Billion for backing out of the deal rather than appealing the decision. Afterwards, Mike Bertolini, CEO of Aetna stated “While we continue to believe that a combined company would create greater value for healthcare consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction,”
The Justice Department that blocked the Aetna and Humana deal may be watching the merger with CVS Health to ensure it doesn’t limit consumer choice. NBC reports that Vertical mergers, companies that are not direct competitors, are under scrutiny by Department of Justice even though they do not directly reduce the market of either the health insurance or pharmacy industries. They have recently blocked an $85.4 Billion deal between AT&T and Time Warner, citing that the consumers choice would be limited by combining a content producer and a distributer. Although there is speculation that they might, the deal between Aetna and CVS Health is not currently being reviewed by the Justice Department.