Consumer / Employer

Report: CVS Health exploring expansion into health insurance through Aetna deal worth $66B

Transformation is a strong undercurrent in healthcare these days. Online retailer Amazon and insurer Anthem want to be in the pharmacy benefit management business and drugstore retailer CVS Health wants to be an insurer, too.

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Amidst these tumultuous times in healthcare, some companies are intent on transformation. Big box drugstore retailers added primary care services to their businesses awhile ago. So it’s not so surprising that CVS Health sees room for expansion into health insurance as it engages Aetna in talks for a possible acquisition amounting to $66 billion, according to The Wall Street Journal.

Neither Aetna nor CVS Health immediately responded to requests for comment.

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A Deep-dive Into Specialty Pharma

A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.

From the perspective of Steve Kraus, a partner with Bessemer Venture Partners, whose healthcare investments include health insurance startup Bright Health, among others, this is the logical next step in the consumerization of healthcare. This is a play to “own” the healthcare consumer, he said in an email.

Kraus speculated that it may just as easily be a way to address the threat posed by Amazon as the online retailer formulates its healthcare strategy.

“If CVS is the insurer and has the retail footprint to provide not only pharmacy but routine care through its minute clinic operations then it in many ways owns the lifecycle of the consumer from insurance to care provision.”

For one healthcare industry insider who works with startups, the development conjured up comparisons with HBO program Game of Thrones as he pondered in an email: “I’m wondering if there’s a new business model ascending to the iron throne.”

It’s an interesting time to enter the insurance industry. With open enrollment scheduled to kick off next week, the Trump administration is determined to dismantle Obamacare and put an end to paying subsidies to health insurers this month. A federal judge backed the decision to the dismay of attorneys general from eighteen states. And yet, Oscar, Clover Health, Bright Health and, more recently, Devoted Health don’t seem intimidated by these changes and see opportunities.

Aetna once had its own expansion aspirations when it sought to acquire Humana until the Department of Justice, backed by a court decision, scuppered the deal in 2015.

There’s more transformation to come. Anthem is parting ways with Express Scripts, a company that has its own transformation plans, to be a pharmacy benefits manager in its own right and Amazon is positioning itself in a way that suggests it could either be a pharmacy benefits manager or partner with one. The online retailer has acquired wholesale pharmacy licenses in at least 12 states, including Nevada, Arizona, North Dakota, Louisiana, Alabama, New Jersey, Michigan, Connecticut, Idaho, New Hampshire, Oregon and Tennessee, according to a story from the St. Louis Post-Dispatch. 

The pharmaceutical industry is also facing some significant changes depending on whether other states take a lesson from California to limit drug prices by forcing companies to justify why they need to increase them.

One thing is undeniable: We live in interesting times.

Photo: nevarpp, Getty Images