CVS makes more than $66 billion bid for Aetna: sources

A deal would merge one of many nation’s largest pharmacy advantages managers and pharmacy operators with certainly one of its oldest well being insurers, whose far-reaching enterprise ranges from employer healthcare to authorities plans nationwide.

Aetna shares rose greater than 11 %, or $18.48, to $178.60, whereas CVS shares fell three %, or $2.22, to $73.31, after the Wall Road Journal first reported on the talks earlier on Thursday.

Healthcare consolidation has been a well-liked route for insurers and pharmacies, underneath strain from the federal government and huge firms to decrease hovering medical prices.

Pharmacy profit managers (PBMs) resembling CVS negotiate drug advantages for medical insurance plans and employers, and have in recent times taken an more and more aggressive stance in value negotiations with drugmakers.

They usually extract reductions and after-market rebates from drugmakers in trade for together with their medicines in PBM formularies with low co-payments.

A tie-up with Aetna might give CVS extra leverage in its value negotiations with drug makers. However it will additionally topic it to extra antitrust scrutiny.

The deal might additionally assist counter strain on CVS’s inventory following hypothesis that Amazon.com Inc is making ready to enter the drug prescription market, utilizing its huge e-commerce platform to take market share from conventional pharmacies.

CVS made the supply earlier this month, though the 2 corporations have been in discussions a few potential deal for a number of months, the sources mentioned.

These talks had been carried out primarily between CVS Chief Govt Officer Larry Merlo and Aetna CEO Mark Bertolini, and had been geared toward making executives snug with the concept of a merger, the sources mentioned.

CVS and Aetna began discussing phrases solely lately, and a deal will not be anticipated for a number of weeks, one of many sources added, cautioning that the tempo of the talks might speed up given the publication of the negotiations.

The sources didn’t specify how a lot of CVS’ bid is money versus inventory, however given CVS’s and Aetna’s market capitalizations of $77 billion and $54 billion, respectively, a considerable inventory element is probably going in any deal.

Aetna and CVS declined to remark.

Aetna earlier this yr closed the door on a cope with rival insurer Humana Inc after antitrust regulators mentioned that mixture and a rival deal between Anthem Inc and Cigna Corp had been anti-competitive.

UNCERTAIN TIMES AHEAD

The deal comes after years of main modifications to the U.S. medical insurance business underneath former President Barack Obama, whose 2010 Reasonably priced Care Act created new floor guidelines for a way insurers function and expanded insurance coverage to 20 million extra People.

Republican President Donald Trump has promised to show again lots of the Reasonably priced Care Act’s aspects, however Congress has not been in a position to agree on a repeal or a substitute. The shortage of progress – in addition to Trump’s government order to carry down healthcare prices – has created uncertainty for insurers as they head into 2018.

After the cope with Humana fell aside, Bertolini has mentioned that he didn’t consider massive offers had been doable within the insurance coverage business.

However analysts have speculated a few tighter partnership between Aetna and CVS since early within the yr. CVS and Aetna have a long-term contract by which CVS has supplied pharmacy advantages for Aetna prospects.

“Aetna actually makes one of the best sense” mentioned Jeff Jonas, a portfolio supervisor at Gabelli Funds. “It’s their largest consumer on the PBM facet. They actually have related views as to the place healthcare ought to go, which is to the retail setting.”

Jonas, who owns each Aetna and CVS shares, famous the 2 corporations had been already speaking about working collectively on Minute Clinic, on residence infusion and different providers.

“To go from that to a full merger is a giant step however it’s not large,” he mentioned.

Final week No. 2 insurer Anthem Inc. introduced plans to handle its personal pharmacy advantages with the assistance of CVS, a transfer that may give it a set-up just like UnitedHealth Group Inc. and its Optum unit. Insurers need extra management over the pharmaceutical element of care as they implement pricing schemes with docs and hospitals which might be based mostly on well being outcomes, not simply procedures.

In addition they wish to work on driving down prices, and as a pharmacy profit supervisor, would negotiate instantly with drugmakers.

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