The Department of Justice gave CVS Health preliminary approval to complete its $69 million merger with Aetna, taking the pharmacy retailer one step closer to its goal of becoming a data-driven health care company with a personal, individualized touch.
CVS wants to combine its pharmacies with Aetna’s insurance business in hopes of lowering costs for insurance, prescription drugs and patient care, while providing greater price transparency to consumers in an industry that isn’t often known for that.
Becoming a more data-driven company would enable CVS to better predict who might develop diseases such as diabetes, CVS CEO Larry Merlo told CNBC. With this information, CVS could provide customers with preventive counseling, educate people with diabetes on how to lose weight and eat better, and even help patients monitor blood glucose levels with text messages that alert them when the results look concerning.
As consumers and regulators alike seek out lower costs and better health care options, the industry is ripe for disruption. The DOJ recently cleared health insurer Cigna’s $67 million acquisition of pharmacy benefits manager Express Scripts, and Amazon recently entered the space through the acquisition of PillPack, which makes monthly deliveries of medications in time-stamped, pre-sorted dose packaging to help people who manage multiple medications. The e-Commerce giant has sought to disrupt the industry in other ways, namely by creating a health care company of its own with Berkshire Hathaway and JPMorgan Chase.
Health care expenses have been skyrocketing, with medical spending currently consuming 18% of the nation’s gross domestic product. Medical costs have risen by an average of 5.5% or more every year since 2007, according to accounting and consulting firm PwC. The U.S. economy has, by comparison, grown by an annual average of roughly 3.2% since 1947.
To proceed with the merger, CVS/Aetna had to divest Aetna’s Medicare Part D prescription drug plan business to WellCare Health Plans. Regulators initially expressed concerned about the overlap between CVS and Aetna’s Medicare Part D plans, but the DOJ felt the sale resolved competition concerns posed by the merger.
“The divestitures required here allow for the creation of an integrated pharmacy and health benefits company that has the potential to generate benefits by improving the quality and lowering the costs of the healthcare services that American consumers can obtain,” said Assistant Attorney General Makan Delrahim in a statement.