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Amazon threat one big reason for CVS, Aetna to merge

FierceHealthcare reports that  industry analysts say that multiple market forces combine to make drugstore behemoth CVS’s possible takeover of giant insurer Aetna (based in Hartford but moving to New York)  attractive  for both two companies. CVS is based in Woonsocket, R.I.

“One of the biggest ones is Amazon’s possible entrance into the prescription drug distribution business, which Leerink Partners analyst Ana Gupte says is a ‘massive threat’ to CVS, both in the pharmaceutical market and front-store sales,” Fierce reported.

The St. Louis Post Dispatch has reported that the online retail giant has already been approved by 12 states to become a wholesale pharmaceutical distributor there.

If the CVS-Aetna merger happens, CVS could respond to the Amazon-induced market pressure on its retail pharmacies by using more of its retail spaces to offer such healthcare services  as labs and dialysis, say analysts for Jeffries Group, the investment bankers.

Aetna, for its part,  has powerful reasons to want a merger with CVS.

For one, Fierce reports, “CVS’s capabilities, including its Minute Clinics and its Coram home infusion business, could help Aetna improve health outcomes and reduce costs. Aetna’s leaders have also long expressed a desire to move care closer to the consumer, and they’ve hinted at the possibility of working closer with CVS once the insurer’s long-term pharmacy benefits management  (PBM)contract with CVS expires in 2020.”

Gupte  also said that that Aetna has probably felt it should  enter the PBM business given the  announcement by another big insurer, Anthem that it would build its own  PBM partnership with CVS—and UnitedHealth’s success with its in-house PBM, OptumRx.

Aetna “likely sees solidifying a lasting relationship with its preferred partner CVS as a way to leave [Anthem] jilted at the altar,” she said.

Fierce reported that “Gupte pointed out that Anthem was likely not looking for a long-term relationship with CVS anyway, as its ultimate goal was to ‘go it alone’ with its IngenioRx PBM brand. Still, she predicted that Anthem might walk away from its pact with CVS if the company consummates a deal with Aetna.”


Companies launch their own healthcare reform

Having given up on Congress, dozens of companies have launched an initiative called the Health Transformation Alliance to change how their employees get healthcare.

Robert Andrews discusses the initiative in a piece in The New York Times. Among his comments:

“Rather than having individual companies contract with benefit managers, we worked with CVS and OptumRx on an approach under which we gain more access to drug companies’ pricing structures, strengthening our position in cost negotiations. That results in lower prices for the same medicines and allows the alliance members to achieve considerable savings. We also are working to ensure that formularies, the lists of prescription medicines covered by insurers, are the right ones for patients, not just the most profitable ones. This can increase the use of lower-cost generic drugs.”

“We and our employees spend more than $5 billion each year on four procedures and ailments: knee replacements, hip replacements, back pain and diabetes. These common problems account for 20 percent of the money our companies spend on treatment. Starting next year, we will create new medical networks in three major cities that will focus on delivering better results for these ailments and procedures at better prices. Our new networks are likely to compete with some doctors and hospitals that don’t have as good a treatment record. The health care arena needs more competition, and we will encourage it.’

To read this important piece, please hit this link.


Will UnitedHealth Catamaran purchase slow drug costs?

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This Wall Street Journal news story raises the question of whether UnitedHealth’s purchase of pharmacy-benefits manager Catamaran will really result in lower drug prices. Pharmaceuticals prices have become an ever-more important part of healthcare inflation, even as some other costs in the sector have slowed.

 

Catamaran will be merged with UnitedHealth’s own OptumRx unit. The WSJ reported that the combined benefits manager ”will cover an estimated 31 million lives.”


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