Coverage: CVS to buy Aetna in $69 billion deal

Aetna Inc.’s board of directors approved on Sunday the U.S. health insurer’s sale to drugstore chain operator CVS Health Corp. for approximately $69 billion cash and stock,.

Carl O’Donnell and Greg Roumeliotis of Reuters had the news:

The $69 billion deal will be this year’s largest corporate acquisition. It will combine one of the nation’s largest pharmacy benefits managers (PBMs) and pharmacy operators with one of its oldest health insurers, whose far-reaching business ranges from employer healthcare to government plans nationwide.

According to the agreed terms, Aetna shareholders stand to receive $145 per share in cash and 0.8378 CVS Health shares for each Aetna share, the sources said. The companies will announce the deal later on Sunday, the four sources added.

Aetna shareholders will own about 22 percent of the combined company, while CVS shareholders will own the remainder, the sources said. Three Aetna directors, including Aetna’s Chairman and CEO Mark Bertolini, will join CVS’s board of directors, the sources added.

Austin Frakt of The New York Times looked at how the deal could benefit consumers:

But by disrupting the pharmacy benefits management market, and by more closely aligning management of drug benefits and other types of benefits in one organization, CVS could be acting in ways that ultimately benefit consumers.

You probably know CVS as a retail pharmacy chain — it runs nearly 10,000drugstores. But over the years, it has diversified. It now runs walk-in clinics, including in Target stores. And it runs one of the largest specialty pharmacies, dispensing high-priced drugs that require special handling.

In a big move a decade ago that set the stage for more recent developments, CVS purchased a majority of shares of Caremark for nearly $27 billion to enter the pharmacy benefits management business.

Pharmacy benefits managers are companies that help insurers devise and run their drug benefits, including serving as middlemen in negotiating prices between insurers and drug manufacturers.

Bruce Japsen of Forbes.com writes that consumer’s pharmacy choices will narrow due to the deal:

Analysts say CVS was an early leader in efforts to differentiate its pharmacy network.

“It started with CVS’s Maintenance Choice program several years ago,” Mercer’s Dross said of the narrow network trend. ”At this point everybody has a ‘retail 90’ network and many employers have adopted them. Over time mail order has not grown but retail has.”

Beyond narrowing networks, employers and others picking up the tab for healthcare and the cost of drugs in particular are working on myriad strategies with pharmacies.

“In general, our clients have not sought to utilize narrow networks for pharmacy, given that the savings potential from such an approach has not been significant,” John Malley, a senior vice president who leads Aon’s U.S. pharmacy team. “While rising pharmacy costs continue to be a concern for employers, other strategies such as specialty drug management, formulary management, and negotiation of newer, more aggressive pricing terms have been more prevalent.”