Even before reports surfaced Thursday claiming that CVS Health was in talks to buy Aetna, the nation’s third-largest health insurer, the two were known to be discussing forming closer ties.
But a full-blown merger of the healthcare giants would be complicated and unlikely given recent antitrust scrutiny in the sector and given that the drugstore chain is already going into business with an Aetna rival, Anthem.
Anthem just last week said it was forming its own pharmacy benefit management company, IngenioRx, with CVS, which operates a PBM. That was seen as a way to compete with the nation’s largest health insurer, UnitedHealth Group, which owns the PBM OptumRx.
But for CVS to operate a PBM with Anthem, the No. 2 health insurer, while owning Aetna, the No. 3 insurer, would be highly unusual coming off a period of intense antitrust scrutiny of the health insurance industry. Aetna and Humana, the nation’s fourth-largest insurer, pulled the plug on their merger last year after intense antitrust scrutiny over the potential creation of a monopoly purchaser of health services.
Neither CVS or Aetna would comment. “As a matter of policy we don’t comment on market rumors such as this,” a CVS spokesman said Thursday afternoon.
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The Wall Street Journal reported Thursday afternoon that the drugstore chain was in talks to buy Aetna for more than $200 a share, citing “people familiar with the matter.” Such a deal would value Aetna at more than $66 billion, the report said. The New York Times also reported that Aetna and CVS have been in discussions about a potential merger for “at least two months.”
But the Anthem partnership came about since those talks. The Anthem partnership involves a five-year agreement with CVS Health for services effective Jan. 1, 2020. IngenioRX “will combine its member and provider engagement initiatives and market leading pricing with CVS’ point-of-sale engagement, such as member messaging and Minute Clinic.”
PBMs have been under fire of late, as some have questioned whether the drug purchasing middlemen are passing along all of the savings to employers or consumers that they could. Anthem last week said it wanted to partner with CVS to bring more transparency to drug pricing.
Aetna, meanwhile, has a contract with CVS Health that runs through 2019.
Earlier this year, CVS and Aetna executives said they were working on changes to the pact to benefit both parties.
“As we get closer to our 1/1/20 renewal date is the first opportunity to consider renewing it, we continue to look at what we can do in contract,” Aetna CEO Mark Bertolini said earlier this year in response to an analyst’s question about the insurer’s relationship with CVS Health’s PBM. “And so we have some developments and conversations underway around our Medicare product as well as our commercial product.”
It’s clear both CVS and Aetna are concerned about the rising costs of prescription drugs to their customers. But whether that means a pharmacy chain with a PBM is ready for a new frontier was unclear.
“I think going forward, the PBM relationship as a standalone model is a troubled relationship,” Bertolini said in May. “As we look at all the noise around drug pricing and where are the discounts and where are not the discounts, it is still our view that drug pricing transparency’s incredibly important for all consumers.”
As for CVS, CEO Larry Merlo was thinking about more ways the two could work together.
“I think we have a terrific relationship with Aetna,” Merlo said during its first quarter earnings call earlier this year. “The opportunity is not just in terms of what we can do across our pharmacies, but now you think about infusion in the home, the role of MinuteClinic, now long-term care. I think that there are some exciting opportunities as we think about partnering more broadly.”