Finance: CVS Health is buying Aetna for $69 billion in 2017's biggest deal

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CVS Health President and CEO Larry J. Merlo

The deal would create a new healthcare company that includes an insurer, a retail pharmacy, and a company that negotiates drug prices with drugmakers.

  • CVS Health is buying Aetna for $69 billion.
  • The deal that was rumored for months was finally announced on Sunday.
  • The merger could reshape the American health care system as we know it.

CVS Health is buying Aetna, the companies announced Sunday.

The pharmacy giant is acquiring the third largest insurer in the US in a $69 billion deal.

The deal creates a new type of company that includes a health insurer, a retail pharmacy, and a company that negotiates prescription drug prices with drugmakers called a pharmacy benefits manager. It's the biggest merger to happen in the US in 2017.

"This is a natural evolution for both companies as they seek to put the consumer at the center of health care delivery," the companies said in a news release.

The timing of this massive acquisition is no coincidence. Speculation that Amazon might be getting into the pharmacy business has been rampant for months, and the company's notorious for stepping into new businesses and crushing the competition with low price, fast delivery, and its massive network of loyal shoppers.

What this means for how your medication gets paid for

With the Aetna deal, CVS wouldn't be alone in controlling both the insurer and PBM part of paying for prescriptions. UnitedHealthcare, for example, owns the PBM OptumRx, while Anthem, which owns a variety of Blue Cross Blue Shield health insurance firms, will be launching its own PBM called IngenioRx.

Essentially, CVS would own every step of the prescription drug process with the exception of drug wholesalers, which are in charge of shipping drugs to pharmacies and hospitals, and the pharmaceutical companies that actually make the drugs. That would keep much of the money changing hands within the same company.

Here's a chart explaining how a drug travels from pharmaceutical manufacturer to a patient, and who takes a cut in the process. It's a complicated web of payments and rebates, but the simplified outcome of a deal that puts pharmacy, insurer, and PBM in one company is that the combined business walks away with more of a drug's sale price in the end.

With the Aetna deal, CVS would control everything that happens once a wholesaler has handed off the drug.

Source: https://slimgist.com

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