5 things to know about the CVS-Aetna deal

CVS Pharmacy
As part of its acquisition of Aetna, CVS plans to transform its stores to offer more healthcare services. (Mike Mozart/CC BY 2.0)

CVS and Aetna are promising that their $69 billion merger, which the two companies announced on Sunday, will “revolutionize the consumer healthcare experience.”

Indeed, the companies have big plans for how to maximize their capabilities if the transaction closes—plans that involve reimagining CVS’ pharmacy locations, expanding the use of data analytics, streamlining care coordination and more. However, accomplishing all that won't be easy.

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Here’s a look at some of the key facts we know about the merger so far:

  • Aetna will operate as a standalone subsidiary. That means Aetna will continue to be led by the insurer’s current management team, including CEO Mark Bertolini. He and two other top Aetna executives will also be added to the CVS Health board of directors and will play significant roles in the new combined company. “Mark has assembled a great team, and I look forward to their contributions as we remake the healthcare experience,” CVS CEO Larry Merlo said on a call Monday morning.
  • CVS stores will undergo a transformation. CVS stores—which already offer select healthcare services via its Minute Clinics—will soon include space for wellness, clinical and pharmacy services, vision, hearing, nutrition, beauty and medical equipment, the companies said. And many locations will function as a “community-based health hub” that aims to answer patients’ questions about prescription drugs, insurance coverage and their own health conditions. Bertolini said the idea is to have the health hubs function like “Genius Bars” at Apple stores, where customers can walk in and get help. That transformation, however, “won't happen overnight and will require significant [capital expenditures],” Jefferies analyst David Windley noted.
  • Health IT will play a role in the new company’s strategy. The companies said their combination will result in broader use of data to help coordinate care, lower costs, and as Bertolini put it, “provide a more holistic view of each individual.” They also plan to pilot other tech-focused projects like using home devices to help monitor patients after they’re discharged from the hospital and remote monitoring diabetes patients’ blood glucose levels. Diabetes patients could even receive text messages to let them know when their glucose levels are off. Leveraging "high-touch interactions," Bertolini added, are especially key to improving care for Medicare and Medicaid members.
  • The companies expect $750 million in near-term synergies. Those will come from efforts like streamlining redundant corporate functions and shifting care to lower-cost settings, CVS Executive Vice President and Chief Financial Officer David Denton said. Leerink Partners analyst Ana Gupte, Ph.D., however, said in a research note that she’s skeptical of that figure, given health insurance price competition and the need to defend market share against encroachment from major industry players like Optum. Moody’s vice president Mickey Chadha also noted that the transaction will weaken CVS’ credit metrics—since it will be financed largely with debt—and will come with “high execution and integration risks.”
  • CVS says the deal won’t affect its contract with Anthem. Before announcing its deal to buy Aetna, CVS agreed to partner with Anthem on its initiative to create its own pharmacy benefits manager, IngenioRx. While Gupte previously predicted the CVS-Aetna deal would leave Anthem “jilted at the altar,” Merlo said the transaction has no bearing on CVS’ ability to provide a high level of service for IngenioRx and its members, and noted the phase for that partnership is already “well under way.” In addition, Windley noted that Anthem said it went into its PBM deal with CVS with "eyes wide open" knowing that Aetna and CVS might merge.