CVS shares slide and Aetna stock rises on news of merger deal

This Wednesday Jan. 18 2017 file

USA consumers stand to benefit from CVS Health's planned purchase of insurance giant Aetna, executives from the two corporations say.

Americans could benefit from the planned merger of the health insurance provider Aetna and CVS, but some health care analysts caution that one unintended outcome could be a race toward greater consolidation in the industry, which could have as-yet-unknown impacts on access and cost of care. In 2015, Aetna and Humana (HUM) announced a $34 billion merger, while Anthem (ANTX) agreed to acquire Cigna (CI) for $54 billion. Reuters first reported the terms of the deal earlier on Sunday.

Who needs to go to the doctor when you can go to your local CVS drug store instead? Customers can get physicals, flu shots or treatments for sinus infections at the clinics.

Some CVS shoppers also are skeptical about getting their health checked in a retail store. "What if there's a vision and audiology center, and perhaps a nutritionist, and some sort of care manager?"

Health care consolidation has not always benefited consumers, but CVS CEO Larry Merlo told The Wall Street Journal that it wants to lower costs for customers.

CVS plans to run Aetna as a separate business unit.

"The combined company will also be able to better understand patients' health goals, guide them through the health care system, and help them achieve their best health". That could keep millions of customers away from Amazon if the retail giant decides to expand into prescription drugs.

Aon's Winkler expects this will lead large companies to turn to their insurer for pharmacy benefits the same way mid-sized companies have.

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That could eventually cut costs substantially, with the clinics serving as an alternative to more expensive hospital emergency room visits.

CVS is the No. 2 US provider of prescription drug benefits and competes with larger rival Express Scripts Holding Co ESRX.O .

Independent PBMs have always been criticized for potential conflicts of interest with insurance company clients, because they could potentially keep cost savings from drug negotiations rather than passing them on to patients. "You could see a scenario where they dramatically change how we access care, how we pay for care, how we focus on access, cost and quality". Aetna's stock is trading about 10% lower than the proposed price of the deal, evidence of investors' uncertainty.

Analysts have said the CVS-Aetna deal could prompt other healthcare sector mega-mergers, as rivals scramble to emulate the strategy.

Last year, large employers' concerns over two proposed mergers between health insurers Aetna and Humana Inc HUM.N and between Anthem Inc ANTM.N and Cigna Corp CI.N were a major factor in USA antitrust regulators blocking the deals.

That appears to be the logic behind CVS's decision to buy health insurer Aetna for $69 billion. CVS is already the largest provider of Medicare drug plans, and Aetna is the fifth largest, according to data compiled by Bloomberg Intelligence.

But ant-trust regulators still need to evaluate it.

How much scrutiny the deal gets from the government may depend on which federal agency reviews the takeover - the Justice Department, or the Federal Trade Commission.