Why Would CVS Want to Buy Aetna?

If you have seen the New York Times article disclosing that CVS is in talks to acquire Aetna, you have a pretty good sense of Aetna's urgency to try and insulate itself from pressure from bigger players in the health insurance world. That much seems apparent after the failure of the proposed Aetna-Humana merger. But, why would CVS want to merge with Aetna in that they already have Aetna's PBM business tied up in a long-term contract?

It is reported that a prescription drug and PBM behemoth like CVS might see acquisition of Aetna as insulation from a new entrant into the world of retail pharmaceutical drugs: Amazon.   CVS must fear quite an entry by Amazon for this to be genuine for it is CVS that is feared by almost everyone else in these spaces. But Amazon's entry might well involve the re-invention of what is now called "mail order" pharmacy — a lucrative younger sibling to brick and mortar pharmacies.

Imagine this: pharmaceutical drugs delivered to your home or your Amazon locker with the speed of Amazon Prime. Pharmaceutical drug pricing transparency that would allow you to both order online and to calculate whether it would be more cost effective to order out-of-pocket or through an insurer for a given prescription.  Perhaps, more sincere HIPAA compliance and privacy than is currently found in the CVS Drugs brick and mortar pharmacy encounter where, in an open space standing at a register with a line beginning only inches behind you, CVS now requires you to call out your correctly spelled name and your date of birth.  After all, the third ingredient for identity theft — your social security number — is apparently not difficult to guess once location and date of birth are known. Many list location of birth and date on open access Facebook pages. 

Whether all of this is just wild speculation about what Amazon might bring to prescription drugs only time will tell, but I have no doubt that a significant part of CVS's interest in Aetna is in girding its loins for an eventual CVS-Walgreens showdown. We watch consolidation in all aspects of the prescription drug industry: wholesale, PBMs, retail, mail order, specialty pharmacy, and in-store clinics that have prescribing authority while acknowledging that the retail clinic is now the primary care provider for many Americans.

The CVS-branded encounter must surely be considering outpatient surgery centers next.