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CVS Aquisition Of Aetna Likely To Shake Up Health Insurance Industry

Dec 4, 2017
Originally published on December 4, 2017 6:09 am
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RACHEL MARTIN, HOST:

There's news of a merger this morning that could change how you and your family get your health care. Drugstore chain CVS is preparing to buy health insurance giant Aetna for $69 billion. It is a mammoth acquisition, pairing CVS's 9,000 drugstores with Aetna's insurance that covers around 22 million people. We should note Aetna is an occasional sponsor of NPR programming. NPR's health policy reporter Alison Kodjak is in the studio with us this morning to talk about this. Hey, Alison.

ALISON KODJAK, BYLINE: Hey, Rachel.

MARTIN: How's this merger going to change things for consumers?

KODJAK: Well, so first you need to think about CVS. It's actually much more than just a drugstore chain. It is what's called a pharmacy benefit manager. And it's huge.

MARTIN: What does that mean?

KODJAK: It manages the prescription insurance that you get with your health care coverage. So you might not know that CVS Caremark is managing your pharmacy benefit, but they're the ones who get the copays and set the prices and that kind of thing. So they're already in the insurance business. But they also have all these storefronts. And so the idea - what they're thinking is, and Aetna, is that they will create these what they're calling health care hubs, places where you can go, especially if you have Aetna insurance, and get your basic health care.

You know, if you have an earache or need a blood test or you have diabetes and need monitoring, you can just go to your CVS store. You'll have a pharmacist, maybe a nurse practitioner. And your health insurance will be seamless at that location.

MARTIN: Interesting. I mean, they've already dabbled in that. You can go get vaccinations - some vaccinations there, flu shots. So this is an expansion, clearly.

KODJAK: Exactly. Well, it's an expansion that could give them a lot more power in the industry, too, because if they control the insurance, they can say, we'd like you to come to the CVS store or we'll charge you less if you come to the CVS store and get your health care.

MARTIN: So is this going to mean that drugs are any cheaper?

KODJAK: Well, they are saying that it'll make not only drugs cheaper but also the cost of health care overall. It's not clear - I mean, that's clearly not a unanimous opinion. But people talk a lot about the high cost of drugs but other medical services actually are much more expensive. We're spending a lot more on hospital care and doctor care than on drugs. Drugs are growing faster. CVS and Aetna, what they're saying is if we can direct people away from emergency rooms and into these sort of low-cost clinics, that'll cut the overall cost of health care.

Now, there may also be an opportunity to lower the cost of drugs to consumers by creating this big company that has huge amount of market power to negotiate with pharmacy companies. But up until now pharmacy benefit managers, these CVS-type companies, aren't actually known for really lowering the cost of drugs in the system because they take a share of the profit.

MARTIN: Yeah. So what are the other big critiques? I mean, when you've got these two huge conglomerates merging - raises antitrust issues, other kinds of concern?

KODJAK: It does. There's a lot of question about the market power that the company will have. And there's concern that it will be too powerful in the overall industry. What one analyst said to me is that this doesn't really make sense, except that CVS and Aetna are worried that Amazon is going to get into the prescription drug business...

MARTIN: Because why wouldn't they? They're in everything else.

KODJAK: Exactly. And Jeff Bezos has hinted that that may be his next step. And he referred to this as a hysterical reaction to that. But other people say it might make sense. If Amazon were to get in, it's a behemoth. Then you create another behemoth to compete with it. You know, we'll have to see whether or not the Justice Department and Federal Trade Commission look kindly upon this. They've broken up, over the last couple of years, proposed mergers of insurance companies. But because these aren't two specifically insurance companies, it may work a little bit better.

MARTIN: So just briefly, do we know how the Trump administration feels about this and the Department of Justice?

KODJAK: We have not seen any statements from them on this in particular. So we'll have to wait to see how they react.

MARTIN: All right. NPR's Alison Kodjak. Thanks, Alison.

KODJAK: Thanks, Rachel. Transcript provided by NPR, Copyright NPR.