CVS, America's largest retail pharmacy, has been linked to a merger with Aetna Health, one of the largest health insurance companies in the U.S. The potential acquisition by CVS could bring Aetna's valuation to a staggering $66 billion, making it one of the largest acquisitions that the healthcare industry has ever seen. If CVS choose to pursue that route, it could very well take them a step further to becoming a colossal healthcare company, while maintaining its dominance in the retail sector. The news, however, has sparked some pushback from industry leaders claiming that it could pose anti trust violations due to the vertical integration that comes along with it. While these claims do hold merit, such as price and consumer data control, they still overlook the competition that currently exists in the market (Amazon and United Healthcare) and the system's antediluvian transactional methods, such as the release and exchange of patient information across boarders.
First, the deal could bring CVS a step closer to competing with United Health, America's largest healthcare provider, which would decrease the latter's ability to monopolize the industry or at least making prices and care more competitive for consumers. United Health's merger with Optum, a pharmacy benefit manager, increased its influence over the prescription market and allowed it to negotiate more effectively with pharmaceutical companies. In doing so, they were able to effectuate clawbacks from consumers that resulted from their negotiable drug prices. They also benefit dramatically from their integrated healthcare network. They make it extremely difficult for consumers to exchange information with non-network stakeholders by charging higher fees and premiums. These strengths should be subject to concern as they portray a sharp resemblance with a monopoly. Instead of highlighting the concerns from the looming Aetna acquisition, we should see it as a way to consolidate a disenfranchised industry while making it more competitive. The consolidation between CVS and Aetna would effectuate a transfer of power from United Health to consumers. CVS could leverage their strategic influence in the pharmaceutical sector by decreasing drug prices for consumers, making it more difficult for United Health to continue pursuing clawbacks.
Another benefit that would arise from the deal is the emergence of a consolidated industry. Healthcare is known for its disenfranchised network. This has made it extremely difficult for data to flow across party boarders, care to be maximized, ultimately leading to higher costs for both patients and providers. CVS could take the initiative to grow its network and making it more efficient and streamlined. This would decrease unnecessary doctor and emergency visits due to they leverageable walk in clinics. Moreover, the industry would also benefit from the growth of digital health that would be conducive to the deal at hand. The ease in the transactions between stakeholders would essentially effectuate a standard of care that seemed elusive to the industry. In an era where patient centric and individualized care are top priorities, it only seems wise for CVS to pursue the acquisition.
The Healthcare industry needs to take scrupulous notes from the F&B and cloud computing industries, which have been upended by Amazon's aggressive acquisition strategy. An outsider like Amazon would do more harm than good as they would both dominate horizontally and vertically. Now, is CVS still in the wrong for pursuing such a strategy?