SAN FRANCISCO — A possible $66 billion takeover of health insurer Aetna by CVS Health could lower costs to both companies, leading to the hope that at least some savings might be passed through to patients.
"Aetna participants are likely to see the most benefit...because CVS would be maybe able to offer them lower co-pays if they shop with them," said Joseph Agnese, senior analyst CFRA,
Late Thursday, the Wall Street Journal, citing unnamed people who said they are familiar with situation, reported CVS Healthcare was in talks to acquire Aetna for more than $200 per share. Representatives of both companies declined to comment on the report.
While at first glance, a bid by CVS, with its 9,000 national pharmacies, for Aetna might seem like the mouse swallowing the cat, there are other facets to its business that make an insurance company an interesting acquisition target, experts say.
An important part of CVS' business is CVS Caremark, the prescription benefit management subsidiary of CVS Health. Prescription benefit management companies work with insurers to decide which drugs are most beneficial and cost efficient. They also negotiate discounts from drug manufacturers.
Currently, CVS Caremark has expertise and access to customers’ pharmaceutical information and medical needs, so it makes sense that the company would want to expand that to include not just pharmacy but full health care, says Mohamed Jalloh,a spokesman for the American Pharmacists Association.
“It could be that they’re trying to expand their service and extend the pharmacy insurance benefit to insuring everything,” said Jalloh.
Agnese says don't expect the deep discounts, but he adds that "the more (CVS) is purchasing, the better the deals they'll be able to get (from drug companies)."
Not everyone is convinced. In a time of rising health care costs and bitter partisan fights over insurance and accessibility, the potential merger may mean more savings for the companies than the individual user.
Research by Leemore Dafny at the Harvard Business School found that consolidation in the private health insurance industry has often led to premium increases even though the insurers with larger local market share were able to obtain lower prices.
The merger wouldn’t likely save much money for consumers, in the opinion of Aaron Katz, an expert on health policy at the University of Washington’s school of public health.
That doesn't’ mean it wouldn’t save money for the companies. “Larger entities tend to be tougher negotiators over price and contracts,” said Katz.
While the proponents of health company mergers often cite the cost savings of merged systems and the benefit to consumers, “I haven’t seen much convincing evidence myself,” Aaron Katz, an expert on health policy at the University of Washington’s school of public health.
Mergers are a road Aetna has certainly been down. Two years ago it agreed to buy Louisville, Ky-based insurer Humana for $34 billion. However, the deal was abandoned earlier this year due to regulatory concerns.