The long-awaited deal closed Wednesday for about $70 billion, bringing together the pharmacy chain and insurance giant.
CVS Health and Aetna Inc. announced the completion of their approximately $70 billion merger Wednesday morning, days after New York state regulators signed off on a deal with the potential to reshape the healthcare industry.
The megamerger, which had been rumored since late 2017, capped off an eventful year for both companies as they vertically integrate heading into 2019.
The combination of a pharmacy giant and one of the "Big 5" insurers is expected to have major ramifications on many aspects of healthcare going forward.
"Today marks the start of a new day in health care and a transformative moment for our company and our industry,” Larry Merlo, CEO of CVS, said in a statement. "By delivering the combined capabilities of our two leading organizations, we will transform the consumer health experience and build healthier communities through a new innovative health care model that is local, easier to use, less expensive and puts consumers at the center of their care."
Karen Lynch, president of Aetna, tweeted her reaction to the announcement, "I am extremely proud to lead the Aetna team as we begin our journey as part of CVS Health."
Federal and state strings attached:
The megamerger received approval from the Department of Justice in October but both companies had to satisfy certain parameters to secure the sign-off from the federal government. The most significant stipulation was Aetna's sale of its Medicaid Part D business to WellCare Health Plans.
California also mandated that the two companies provide $240 million to the state's healthcare infrastructure and guarantee that premium rates won't rise as a result of the deal.
In the Empire State, regulators secured a $40 million commitment from the two companies to support health coverage education along with enrollment protections. As per state approval, Aetna cannot use its funds from covering New Yorkers as part of the CVS deal.
Aetna ratings fall, but stocks rise
On Tuesday, S&P Global Ratings downgraded Aetna, citing "near-term execution risks" due to being purchased by a lower-rated company. Aetna was downgraded from A/A-1 to BBB/A-2, while S&P removed the negative outlook that the Hartford, Connecticut-based insurer had held since last December.
S&P also commented that the CVS-Aetna merger is "ambitious," "potentially game-changing," as well as "new and forward-thinking."
Both CVS and Aetna saw their stocks rise in recent days as state regulators from California and New York blessed the deal. After Wednesday morning's announcement, CVS stock was trading up by 1% while Aetna stock rose 0.12%.
Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.
Photo credit: Jonathan Weiss / Shutterstock.com
The $70 billion deal closed days after New York state regulators gave it final approval.
Combining the pharmacy company and insurance giant has the potential to reshape healthcare.