Business Merger Rumored Between CVS And Aetna Insurance

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Mergers & Acquisitions on Thursday, November 9, 2017.

Mergers and acquisitions in the health care industry have been on the increase in California and nationwide. A recent rumor says that the CVS pharmacy chain is looking to take over health insurer Aetna. As with most contemplated mergers or acquisitions, the parties are looking at major structural benefits to their operations that would impact their respective markets and profits favorably. In this contemplated business merger, CVS is looking at greater influence over the 23 million plan participants who use Aetna as their health insurer.

The benefit would parlay into a greater negotiating position for CVS with drug manufacturers, thus having the net result of lower drug prices. The effect may, however, also reduce the choices available to Aetna customers. Whenever such a transaction becomes an official prospect, the proposed merger must go through various government regulatory reviews and approval processes.

A number of insurers in the health care industry tried to merge recently but were stopped by antitrust actions filed by the U.S. Justice Department. It may be that the attempt to obtain greater negotiating ability with the drug manufacturers, and the increased competitive effect of reducing prices, could temper the reaction of the Justice Department in this type of merger across industries. Drugstore operators are reportedly trying several approaches to battling the tremendous pressures created by rising drug prices.

Another factor that may have motivated CVS to think in terms of a business merger with Aetna is the reported attempt of Amazon to enter the prescription industry. Amazon is reportedly approved to sell pharmaceuticals in 12 states. Analysts believe that a merger with Aetna would put CVS in a stronger position to compete with a move from Amazon. The effect of the rumors gave Aetna's stock value a jolt upward because of the analysts' predictions of the positive impact on stock prices in such a transaction. The process of a major merger will follow similar lines in California and all other states.

Source: cbsnews.com, "CVS-Aetna merger could trigger a wave of takeovers", Ed Leefeldt, Oct. 30, 2017


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