Fearing Amazon, CVS Makes $66B Move

It's more big news in the world of health insurance—and potentially for the wallets of consumers—though this time it doesn't revolve around the fate of ObamaCare. The Wall Street Journal reports that CVS has offered to buy giant insurer Aetna for $66 billion. Why? One big reason is a familiar one: fear of the behemoth Amazon. Here's a look at the details, including the potential implications for customers if the deal goes through:

• Amazon factor: The online retailer has been signaling that it intends to enter the pharmacy business and has been quietly obtaining approval from various state pharmaceutical boards, per a separate Journal story. The very idea is putting pressure on CVS and others to develop a counter-strategy to protect its turf.
• What CVS gets: Buying Aetna could result in millions of the insurer's members turning to CVS pharmacies, walk-in MinuteClinics, and other services, notes the Washington Post.
• What Aetna gets: The insurance arm of the resulting company could use data from CVS pharmacies and clinics to offer care tailored more precisely to the needs of its 44.7 million members. In general, insurers have been trying to maintain closer ties with members, the idea being that it will cut costs in the long run, notes the Post.

• Lower costs? In theory, Aetna members could see savings at CVS, "because CVS would be maybe able to offer them lower co-pays if they shop with them," an analyst with investment research firm CFRA tells USA Today. But the story also raises the possibility that the deal would save only the companies money, and not consumers.
• New model? The resulting insurer-plus-pharmacy company would be similar in scope to UnitedHealth Group, which already owns its own pharmacy benefit manager, Optum. Thus, the merger "makes a lot of sense," says Mizuho Securities, per MarketWatch. "This type of partnership between a retail pharmacy and a managed care company could be the next generation of formulary management in health care services."
• Unlikely: A blogger at Forbes is skeptical that a "full-blown merger" will come to pass given that CVS recently struck a deal with Anthem. "CVS operating a (pharmacy benefit management company) with Anthem, the No. 2 health insurer, while owning Aetna, the No. 3 insurer, would be unusual coming off a period of intense antitrust scrutiny of the health insurance industry," writes Bruce Japsen. In fact, Aetna and Humana dropped plans for a merger last year over antitrust concerns.
• Speaking of mergers: The Journal notes CVS' move might have also been prodded by the demise of Walgreens Boots Alliance Inc.'s intended acquisition of Rite Aid at the hands of federal antitrust regulators. "The death of that deal solidified the view that the solution to intensifying competition must come from beyond traditional channels."

(More CVS stories.)