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CVS-Aetna merger has potential to reshape health care

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PHOTO/BILL KLINE
CVS could become an alternative to an emergency room or urgent care facility, one health care expert says.
PHOTO/BILL KLINE CVS could become an alternative to an emergency room or urgent care facility, one health care expert says.

While the deal won’t be final until blessed by the Federal Trade Commission, the CVS purchase of Aetna could cause a seismic shift in how health care is delivered.

According to reports, the roughly $69 billion deal merges one of the largest health care insurance providers with the pharmaceutical powerhouse, ranked in 2016 by Fortune 500 as the seventh largest company and the largest pharmacy chain in the U.S.

If the merger is approved, it represents a rare consolidation, teaming a health care insurance provider, retail outlets and pharmacy benefit manager under one parent umbrella. It’s a three-pronged approach by CVS as a health care conglomerate, said Chad Meyerhoefer, a professor of economics at Lehigh University

“I can’t say this is the first [such] company, but it is not common,” Meyerhoefer said.

The impact of the merger, if approved, is not known. Some say it could limit choices for consumers and for employers that offer health insurance. And it could mean that CVS pharmacists themselves will see patients for routine illnesses.

“If you are in health care, you’d better be ready for change,” said Carl Seitz Jr., president of the Lehigh Valley Business Coalition on Healthcare in Bethlehem.

VERTICAL INTEGRATION

Recent merger challenges by the FTC of retail competitors Walgreens and Rite Aid soured, prompting Walgreens, after a two-year tussle with the federal agency, to instead buy out some Rite Aid stores.

But the CVS/Aetna deal is different because they’re complementary businesses, not direct competitors.

“With Amazon venturing out into different areas – such as its acquisition of Whole Foods – it is probably not coincidental that huge retailers, like CVS, have determined that they need to take some defensive measures to protect market share,” said Joseph Bubba, managing partner of Fitzpatrick, Lentz & Bubba in Upper Saucon Township and chair of its health care group.

Bubba added such vertical integration in health and wellness segments, does in fact, “make a lot of sense.”

MANDATES?

How the CVS/Aetna merger will affect prices and choice – to employers offering health insurance to workers, as well as to consumers – remains to be seen.

“By acquiring Aetna, CVS can attempt to exert some control over the huge number of participants in Aetna’s health plans to provide some incentive to fill Aetna [prescriptions] at CVS locations,” Bubba said.

Meyerhoefer doubted Aetna would be so heavy-handed as to mandate where subscribers could buy their prescriptions.

“It’s more likely, they’ll offer incentives to purchase drugs there,” Meyerhoefer said, which could lower prescription prices.

POSSIBLY

FEWER CHOICES

Seitz said the risk remained that both employer and consumer choices could be narrowed by the deal.

“A lot of employers [now] give options. Will we get to a point where you don’t have options?” said Seitz of the Lehigh Valley Business Coalition on Healthcare, which represents more than 200 employers who seek to provide access to quality, affordable health care to their employees.

“I am sure that CVS will contend that the ultimate result of the acquisition would be to lower health care costs, but the real impact on the health care industry might not be apparent for years,” Bubba said.

Seitz said the short-term impact of CVS’s purchase of Aetna remained unclear, and he doubted its impact would be felt anytime soon.

“When you have two huge entities, it takes time to see any benefit from this type of merger. With CVS and Aetna joining, who will be next?” Seitz said.

GOOD AND BAD

Weighing the pros and cons of the merger, Shelly Bloom of Emerson Reid LLC said one of several benefits could emerge.

Expanding CVS pharmacy options so patients could be seen by nurses, physician assistants or pharmacists to see patients for routine illness such as a sore throat or sinus infection, could make health care easier to receive and more affordable, Bloom said. She is director of legislative awareness and training at Emerson Reid, a wholesale general employee benefits broker based in Plymouth Meeting.

“CVS could become an alternative to an emergency room or urgent care facility,” she said. “Businesses may find it a little more helpful.”

POTENTIALLY LESS COMPETITION

Bloom said costs could go down or up, depending upon how the deal eventually shakes out and how much competition remained.

When deals “limit choices, there are fewer carriers you have to compete against,” Bloom said.

The result could mean less competition to keep costs down.

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