The CVS Aetna merger is slated to transform CVS pharmacies into community health hubs.

CVS Health recently announced its decision to buy Aetna. The groundbreaking CVS Aetna merger could have a massive impact on healthcare costs while transforming the pharmacy’s culture into one of community medical hubs for basic procedures and primary care.

“We want to get closer to the community, because all healthcare is local,” said Mark T. Bertolini, Chairman and Chief Executive Officer at Aetna.

The merger would create a community of medical hubs by effectively bringing a large portion of the healthcare system together including: retail pharmacies, a health insurance business, and a company that negotiates drug prices with drugmakers. The CVS Aetna merger would cause the company to have a lot more control over how people access and pay for healthcare.

A Groundbreaking Deal

The pharmacy giant agreed to pay $69 billion for the CVS Aetna merger, which is about $207 per share, broken down into $145 in cash and the rest in stock, according to Carolyn Y. Johnson of The Washington Post. If approved by shareholders and regulators, the deal is expected to close in the second half of 2018.

The CVS Aetna merger would be able to seamlessly integrate into the healthcare industry considering CVS currently has 9,700 pharmacy storefronts in communities across the U.S. Additionally, they would add Aetna’s 22 million medical members to its list of clients with access to their nationwide network of pharmacies and walk-in clinics, added Johnson.

On Aetna’s end, the deal is an opportunity to offer a much needed solution for over half of Americans. “The real important part here is that we need to understand that almost 60 percent of Americans don’t have a regular doctor,” said Bertolini.

The Concept

If approved, the CVS Aetna merger is slated to shake up the healthcare industry in major ways. A great example is its community medical hub concept, which Bertolini envisions as representing a primary care model fueled by team effort.

“Think of the Genius Bar at Apple, for example, and this ability to walk in the store and get help. I think this is the kind of idea we want to create in the stores,” he added.  

The healthcare experience is one that will be transformed, breaking down obstacles between healthcare providers and consumers.

“Every health insurance company wants to get closer to the consumer,” said Dan Mendelson, CEO of Avalere Health.

Unlike previously attempted mergers in the healthcare space, this CVS Aetna merger is one that consists of two companies that do not directly compete with each other, a fact that many consider gives them a better chance.

“They’re going to be able to offer you a better-functioning package,” stated Craig Garthwaite, Associate Professor of Strategy at Kellogg School of Management. “There’s some sense in which we’re seeing a reshuffling of the organizational structure, such that insurers are owning providers.”

A Mixed Reception

There are those who feel the CVS Aetna merger may have been an unnecessary step. For Martin Gaynor, Professor of Economics and Public Policy at Carnegie Mellon University, this decision was a confusing one considering Aetna is already a pharmacy benefit manager for CVS. It leaves him questioning whether their true motives are to seek “a short-term bump in stock prices.”

For others, the decision will accomplish the opposite of what it promises. David Balto, former Policy Director at the Federal Trade Commission, believes the CVS Aetna merger will reduce competition and harm consumers.

Nonetheless, this CVS Aetna merger will position Aetna to be more competitive with UnitedHealth Group, which is already the largest insurer in the U.S. Additionally, it will likely spark a trend of similar merges in the healthcare industry.

“I think it will create more consolidation among the insurers and retailers, blurring the lines,” said Ana Gupte, Senior Analyst and Managing Director of Healthcare Services at Leerink Partners.