Why a CVS-Aetna merger makes sense—even if it leaves Anthem ‘jilted at the altar’

Myriad market forces have combined to make a potential Aetna-CVS deal an attractive one for the two powerful healthcare companies, according to industry analysts.

One of the biggest ones is Amazon’s possible entrance into the prescription drug distribution business, which Leerink Partners analyst Ana Gupte says is a “massive threat” to CVS both in the pharmaceutical market and front-store sales.

Indeed, the online retail giant has quietly gained approval in 12 states to become a wholesale pharmaceutical distributor, the St. Louis Post-Dispatch reported.

If the CVS-Aetna deal does happen, CVS could respond to the Amazon-induced market pressure on its retail pharmacies by using more of its retail spaces to offer healthcare services such as labs and dialysis, according to Jefferies analysts.

Aetna, they added, has numerous reasons to view such a deal favorably.

For one, CVS' capabilities, including its Minute Clinics and its Coram home infusion business, could help Aetna improve health outcomes and reduce costs. Aetna’s leaders have also long expressed a desire to move care closer to the consumer, and they’ve hinted at the possibility of working closer with CVS once the insurer’s long-term pharmacy benefits management contract with CVS expires in 2020.

In addition, Gupte noted that Aetna likely felt compelled to enter the PBM business given Anthem’s announcement that it would build its own PBM—through a partnership with CVS—and UnitedHealth’s success with its in-house PBM, OptumRx.

Aetna, she wrote, “likely sees solidifying a lasting relationship with its preferred partner CVS as a way to leave [Anthem] jilted at the altar.”

RELATED: Anthem-CVS deal raises questions for Aetna

Gupte pointed out that Anthem was likely not looking for a long-term relationship with CVS anyway, as its ultimate goal was to “go it alone” with its IngenioRx PBM brand. Still, she predicted that Anthem might walk away from its pact with CVS if the company consummates a deal with Aetna.

That possibility, however, is a long way off considering that neither CVS nor Aetna has confirmed reports that they are in talks to merge. And even if the two companies do officially announce a deal, it will be subject to regulatory scrutiny. 

Both Gupte and the Jefferies analysts pointed that there are some potential antitrust concerns that could be raised about the deal, but they largely saw those issues as surmountable.