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CVS Move on Aetna Likely Driven by Lucrative Pharmacy Benefit Management

Analysis  |  By Gregory A. Freeman  
   November 01, 2017

The pharmacy giant could be trying to move beyond contract-for-services by acquiring a health plan with a huge customer base. Regulators may be wary of the deal reducing options for Aetna members.

The surprise announcement that pharmacy giant CVS will try to acquire one of the leading health plans has analysts wondering what the end game is and why the drugstore chain would be willing to pay more than $200 a share for Aetna, a deal that would value Aetna at more than $66 billion.

It may be all about bringing pharmacy benefit management (PBM) in-house with the health plan, yielding benefits for both the pharmacy and insurance side.

Aetna competitor Anthem had announced just earlier that it was forming its own PBM company, IngenioRx, with CVS, which would help it compete with UnitedHealth Group, which has its own PDM, OptumRx.

The focus on PBM is key to understanding why CVS would value the Aetna shares so highly and why the health plan would entertain the offer, says CEO of Tom Borzilleri of InteliSys Health, a company aimed at bringing greater transparency to prescription drug prices, and the former founder and CEO of a PBM.

"There appears to be a significant shift among payers and plans to bring the function of pharmacy benefit management in-house versus the existing or typical contract-for-services arrangement," Borzilleri says. "What is truly unique about this proposed transaction is that not only would CVS be acquiring a plan, but Aetna would be establishing a brick-and-mortar pharmacy network for members to exclusively access."

CVS could essentially trim competitors from the entire pharmacy network that Aetna currently maintains and possibly incentivize members and doctors to have their prescriptions sent to CVS locations, he explains. It's no secret that CVS maintains one of the highest drug ingredient contract rates in the market, along with Walgreens, Borzilleri says.  

CVS also is motivated by's moves into the pharmaceutical space, he says. The company has been developing a PBM for Amazon employees.

"This deal would allow CVS to better control profitability that it could potentially lose through the imminent emergence of Amazon and essentially steer Aetna members to them exclusively," Borzilleri says. "We have seen a shift in insurers bringing PBM functions in-house and we may see increased activity across other plans to do the same. The problem with this type of consolidation is that members will be given fewer options and there will be a reduction in price transparency."

Gregory A. Freeman is a contributing writer for HealthLeaders.

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