The Los Angeles Times reported Sunday that CVS Health Corp. plans to buy Aetna Inc. for $69 billion in a blockbuster deal that would further consolidate the U.S. healthcare industry by merging one of the nation’s largest pharmacy chains with a major healthcare insurer.
CVS, which operates 9,700 drugstores and 1,100 walk-in healthcare clinics, agreed to pay $207 a share – $145 in cash and $62 in CVS stock – for Aetna, according to the Washington Post and other media reports that cited unidentified sources Sunday.
Spokespeople for CVS and Aetna, which has 22 million medical members, could not be immediately reached for comment. But rumors of the firms’ potential marriage have been circulating for weeks, and both companies repeatedly have declined to comment on the speculation.
For consumers, the merger would be the latest example of how the sale of drugs and other healthcare supplies, patient treatment and medical insurance are being consolidated under one roof.
The deal would enable CVS to expand its range of health services to Aetna’s vast membership, with observers suggesting that CVS’ storefronts increasingly could offer more local care options by becoming community medical hubs offering primary care and pharmaceuticals.
A CVS-Aetna tie-up also could impact consumers by sparking further consolidation among other major players in the healthcare industry.
For the companies, the merger is seen helping them mine new areas of sales growth and, in the case of CVS, fend off a potential threat to its pharmacy business from e-commerce giant Amazon.com, which is eyeing a move into the pharmaceuticals business.
Adding Aetna’s membership to CVS’ business – which includes nearly 900 retail locations in California – also could give CVS added leverage in negotiating for lower drug prices with makers of pharmaceuticals, analysts have said.
Aetna, meanwhile, would use the CVS deal to move past its scuttled plans to acquire rival insurer Humana Inc., and to keep pace with UnitedHealth Group, the nation’s largest health insurer.
UnitedHealth has been aggressively expanding into filling prescriptions as a pharmacy benefit manager (PBM), and it owns more than 400 surgery centers and urgent-care clinics and runs medical practices for about 22,000 doctors nationwide.
PBMs negotiate with drug companies for volume discounts and run prescription drug plans for insurers, employers and government agencies. CVS’ Caremark unit is among the nation’s largest pharmacy benefit managers, but it faces stiff competition in that market from UnitedHealth and others.
But a CVS-Aetna merger would require clearance by federal antitrust regulators and approval is by no means certain. Indeed, Aetna dropped its $34-billion bid for Humana in February after a federal judge blocked it on antitrust grounds.
Still, a combination of CVS and Aetna “would finally meet Aetna’s goal of selling itself without the adverse effects on competition that Aetna’s failed deal with Humana would have had,” analyst Jack Curran of the research firm IBISWorld said in a note last week.
The businesses of CVS and Aetna also have little overlap and thus the merger stands a better chance of being cleared, analyst David Larsen of the investment bank Lerrink Partners said in a recent note.
CVS’ revenue last year totaled $178 billion while Aetna’s revenue was $63 billion. If the takeover offer is $207 a share, that would be a 14% premium to Aetna’s closing price of $181.31 on Friday.