DIAGNOSIS: DISRUPTION

As Amazon considers getting into drugs, CVS looks for cover in health insurance

The second-largest American pharmacy chain is flirting with the idea of buying the third-largest American health-insurance company, part of a blockbuster deal that would cast CVS Health Corp. into new territory.

The acquisition of Aetna, which Reuters reports as being sought for about $66 billion, would give CVS more leverage when negotiating drug prices with pharmaceutical companies. That’s increasingly important as drug companies are under pressure to rein in drug costs (paywall). It’s also important for CVS, which is staring down the possibility that online retail behemoth Amazon might be interested in positioning itself as an online pharmacy—shaking up another brick-and-mortar industry, just as it has for books, general goods, and grocery shopping.

At present, CVS is what’s called a pharmacy-benefit manager, a role that has it negotiating drug benefits for insurance plans and businesses. By actually owning a major health-insurance company—which it’d normally negotiate on behalf of—CVS would cut out a middle man and gain even more negotiating power.

Consumers could see some of CVS’ potential drug-cost savings passed on to them. That offers some glimmer of hope during an otherwise tumultuous moment in the US health-care sphere, which could undergo major changes as US president Donald Trump seeks to roll back the policies of his predecessor, Barack Obama.

The proposed acquisition—which has been discussed as a possibility for months—is still in its early stages, as Aetna executives consider whether they want to sell. If an agreement is reached, it isn’t expected to materialize for several weeks.

The health-care sector accounts for about 18% of America’s GDP, and is filled with all manner of inefficiencies. That has some people hoping that Amazon CEO Jeff Bezos treads into the territory—a powerful corporate figure who might be able to clean up a mess that lawmakers have left to fester.


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