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The Department of Justice recently approved a $69 billion merger between retail pharmacy giant CVS Health and health insurer Aetna.
As a major pharmacy benefits manager with nearly 90 million members, CVS has filled more than 2.5 billion prescriptions and served more than 37 million Americans through its Minute Clinics, according to the company. Through Aetna, nearly 39 million people receive health insurance coverage, the company’s website says.
The deal represents a potential turning point for health care in America, CVS CEO Larry Merlo said Monday during an interview with the PBS NewsHour’s Judy Woodruff.
“We have an opportunity to transform an industry that has gotten way too complicated,” Merlo said. “We know we can do a better job of helping people achieve their best health at a lower cost.”
At a time when chronic illnesses, such as diabetes, hypertension and asthma, amount to 86 percent of health care costs in the United States, Merlo said this merger could recalibrate follow-up care between patients and their doctors and pharmacists, and improve health outcomes. Under the merger, pharmacists would foster face-to-face interactions that create action and change behavior, he said.
But the move has stirred controversy. Opponents say it could make health care more expensive for consumers while delivering higher profits to executives like Merlo.
Here is what we know about this merger and its potential effect on your health care.
How significant is this merger?
This deal could touch the lives of millions of Americans.
It comes at a time when movement across industries is driven by mergers, said Jack Hoadley, a health policy analyst and political scientist at the Georgetown University Public Policy Institute.
“Everyone is scrambling to do deals,” he said.
This latest merger approval comes less than one month after the Department of Justice greenlit a $67 billion health care industry deal between insurer Cigna and Express Scripts, a retail pharmacy company.
The deal between CVS and Aetna represents “a very big consolidation in a rapidly consolidating industry,” said William Galston, a senior fellow at the Brookings Institution who studies antitrust and mergers. In January, he authored a study that said in the last two decades, three-quarters of U.S. industries have become more concentrated. Despite long-standing antitrust laws, this shrinking number of companies dilutes competition and often leaves consumers with higher costs.
This latest development in the health care industry resembles the kinds of massive shifts that reshaped the airline industry, Galston said.
“If others are merging around you, you may face the choice between merging yourself or losing ground, or perhaps being taken over on less favorable terms,” he said.
What does this merger mean for consumers?
As significant as this merger may be, it’s difficult to gauge how much sway it will hold over the lives of individual consumers until the deal is implemented.
“It’s a complicated merger and market, so it’s pretty hard to anticipate how this will play out,” Hoadley said.
People need to pay attention to how this company leverages clinical services for Aetna’s insured customers and how they adapt CVS’ role as a pharmacy benefits manager, Hoadley said. Millions of consumers could either see gains or merger could result in restricted access to providers, he added.
“Time will tell,” Hoadley said.
The National Association on Insurance Commissioners would not comment on the merger’s significance, according to a spokesperson for the standard-setting organization run by state insurance regulators from across the country.
Other groups have pushed back. In August, the American Medical Association issued an analysis that called the merger “anti-competitive,” saying the merger would boost insurer profits rather than save consumers money.
“Empirically, there are reasons to be skeptical that the savings will be realized and ultimately captured by the consumer,” the report said. “Therefore, the potential for harm to consumers from this merger is likely to outweigh any gains.”
To know who this deal was intended to benefit, Galston cautions consumers to keep an eye on the next five years.
“How are the benefits of consolidation allocated between shareholders and consumers?” he said. “If over the next five years we see CVS margins going up along with consumer prices, then we’ll know the answer.”
Laura Santhanam is the Health Reporter and Coordinating Producer for Polling for the PBS NewsHour, where she has also worked as the Data Producer. Follow @LauraSanthanam
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