Chances are your next trip to get treated for a non-life-threatening condition might take you to the drug store.
CVS Health’s $69 billion deal to acquire insurer Aetna could reshape basic health care as the combined company seeks to bolster its prescription drug business while nudging customers away from costly emergency room visits and toward affordable clinical care at the drug store.
If the deal unfolds as envisioned, the CVS store of the future won’t look much like the one you remember, when candy bars, trinkets, toothpaste and makeup dominated the aisles.
Instead, CVS, having already added healthier foods and banned cigarette sales in recent years, is shooting to become a one-stop shop for basic medical services.
With a massive physical footprint of more than 9,700 locations at a time when real-estate costs are an anchor for many traditional retailers, CVS is hoping to remake itself as a health care provider first and retailer second.
“Think of a Genius Bar at Apple, for example — this ability to walk into the store and get help. This is the kind of idea we want to create in the stores,” Aetna CEO Mark Bertolini said on a conference call.
In one sense, it’s a move driven by fear of the future. CVS is aiming to shore up its business as it faces the possibility of online behemoth Amazon selling prescription drugs. The company also recently announced plans to offer next-day delivery in a move widely viewed as a preemptive strike at Amazon.
“Together we plan to build an entirely new health-care concept based on making the principles of making care easier to use and more affordable, while offering consumers the ability to interact with trusted and familiar health-care experts in their communities all across the country,” CVS CEO Larry Merlo said.
In addition, the nation’s No. 1 drugstore chain is trying to grab a greater share of health-care spending and cut costs by combining Aetna’s 22 million-member insurance rolls with its pharmacy benefits management.
Executives said that could lead to lower drug costs for consumers. But experts and watchdogs are skeptical.
“I would be very cautious at taking those kinds of statements at face value because every merger or acquisition announcement that I’ve ever experienced makes those exact same claims,” said Eliot Fishman, senior director for policy at Families USA, a nonprofit that advocates for consumer access to high-quality health care.
The deal, he said, does not address the fundamental driver of high drug prices, which he blamed on pharmaceutical companies.
To be sure, there is still significant uncertainty on how the deal will play out for consumers. But here’s what we know now:
Quick-stop health care is in.
CVS plans to bolster its MinuteClinic, which currently provides nurse-practitioner treatment for minor conditions.
That is likely to involve reconfiguring a significant portion of CVS’ approximately 9,700 locations to add more services. The company plans to experiment in some locations by providing blood work, offering advice from nutritionists and delivering services that require “durable medical equipment,” Merlo said.
MinuteClinic “is not making money now,” but the chain wants to expand the service to bolster foot traffic “into stores, not only for prescriptions but also wider-margin front-end goods,” said Joseph Agnese, a CFRA Research stock analyst who tracks CVS for the independent research firm.
Aetna insurance customers can still fill prescriptions elsewhere. At least for now.
The deal is not expected to have an immediate impact on where Aetna insurance members can fill prescriptions.
But in the long run, CVS could alter insurance terms to get more patients to fill prescriptions through its stores or the mail.
“What Aetna customers are likely to see early on are more plans designed to drive them to CVS for not just their prescription drugs, whether it’s mail-order or in the store, but also for their medical care,” said Marianne Udow-Phillips, executive director of the Center for Healthcare Research & Transformation at the University of Michigan,
Your health care cost increases could taper off.
The CEOs of CVS and Aetna pledged to use the combined power of their companies to lower health-care costs. They said their tie-up will help them use technology to better analyze data to help patients stick to their treatment plans and slash unnecessary spending.
The companies hope to reduce patient visits to emergency rooms for conditions that aren’t serious. They also hope to cut down on instances in which recently hospitalized patients are readmitted to treat the same conditions.
“We will not only improve affordability and quality but we will eliminate the unnecessary complexities that frustrate today’s consumers,” Bertolini said.
But pharmaceutical companies won’t lose much pricing power.
Although CVS hopes to better control prescription drug costs after the deal, experts said pharmaceutical companies retain significant pricing power, in part due to strong patent protections.
Pairing an insurance giant, Aetna, with a pharmacy benefits manager, CVS’ Caremark division, could yield greater sway in the high-stakes jockeying game of drug price negotiation.
But Udow-Phillips and Fishman said there’s no evidence that combining insurance companies with pharmacy benefit managers, known as PBMs, leads to lower costs.
Maybe you won’t be buying drugs from Amazon anytime soon.
If Amazon wants to begin selling prescription drugs, as is widely rumored, the pathway into the market just got a little harder.
If CVS plays hardball and refuses to allow Aetna to extend insurance coverage to drugs purchased through Amazon, that could be a hard pill for the online giant to swallow as it enters a complex and highly regulated market.