CVS bids $66 million to buy Aetna

Avatar By Aaron Sims | 3 years ago

CVS Health Corps offered $66 million to acquire health-insurer Aetna earlier this month and may finalize a deal on it in the next few weeks, sources said Thursday. The proposed buyout would merge one of the United States’ largest pharmacy and pharmacy-benefits operators with the nation’s third-largest health insurer, and potentially impact private and public health-care plans and drug prices nationwide.

Many health insurers and pharmacies have undertaken consolidations to cope with soaring medical costs. CVS has a role in influencing costs because it is not only a pharmacy retailer but also a pharmacy benefits manager. Pharmacy-benefits managers negotiate drug benefits for health-insurance plans and employers.

They have also led price negotiations in recent years with drug makers. Drug makers often give them discounts and rebates for their drugs in exchange for making sure that insurance plans cover the drugs with low co-payments.

Acquiring Aetna could provide CVS with more leverage in price negotiations with drug makers. At the same time, it would also put CVS under tighter antitrust scrutiny.

The two companies have a history of working together, according to Jeff Jonas, a Gabelli Funds portfolio manager who owns shares with both companies. He noted that Aetna currently has a long-term contract with CVS in which Aetna customers get extra pharmacy benefits at CVS pharmacies and that the two companies have been discussing collaboration on Minute Clinic, home infusion, and other services.

“Aetna really makes the best sense (for CVS), He said. “They really have similar views as to where healthcare should go, which is to the retail setting… To go from that to a full merger is a big step but it’s not huge.”