[{"innerBlocks":[],"name":"core\/freeform","postId":126332,"blockType":{"name":"core\/freeform","keywords":[],"attributes":{"content":{"type":"string","source":"raw"},"lock":{"type":"object"}},"providesContext":[],"usesContext":[],"selectors":[],"supports":{"className":false,"customClassName":false,"reusable":false},"styles":[],"variations":[],"apiVersion":3,"title":"Classic","description":"Use the classic WordPress editor.","category":"text"},"originalContent":"The reported bid by CVS for Aetna at first looks counterintuitive. The potential acquisition of a health insurer by an company that operates brick-and-mortar pharmacies and one of the nation\u2019s largest pharmacy benefit managers is unprecedented.

For good reason, provider organizations may question the impact of these diverse industry segments on their operations, particularly whether care delivery or prescribing practices will be affected.

Making sense of the reported combination\u2014and particularly realizing its potential impact on traditional healthcare providers\u2014requires recognition of some of the outside forces impacting these two industry segments and how the interplay between them\u2014and between providers and patients\u2014is changing.

A key is looking at the market forces being brought to bear on both potential partners.

The world is rapidly changing for health insurers. For decades, much of the economic interplay in the industry has been between providers of healthcare and the entities that pay the bills. Insurers, as the holders of the premium payments and the payers of patient bills, were typically combatants with providers over how much would get paid by whom.

Health insurers have undergone significant consolidation, to the point that some of the most recent proposed mega-mergers\u2014which would have resulted in only three large health payer companies\u2014were rejected by federal regulators.

And in recent years, the very nature of healthcare reimbursement is changing. Value-based care turns incentives on end\u2014instead of reimbursement based on quantity of services (which can be argued about ad infinitum), payment is moving to an approach seeking the most value. That movement lines up the incentives for both providers and payers.

In that world, this is the beginning of questioning the role for health insurers. You can see those companies begin to slide into new and different roles. For example, in the past 10 days, Anthem announced that it is creating a new digital health platform that integrates employees\u2019 healthcare and benefits data, with the goal of engaging patients in their own care. It\u2019s just a small example, but it exemplifies the move of insurers to re-invent themselves ahead of the shift to value. Absent this re-imagination, insurers will have a new and perhaps diminished role in the healthcare ecosystem.

And now CVS, which has increasingly sought to diversify its services, ranging from in-store urgent care clinics to a program called Cigna Health Works, which aligned its clinics to specific Cigna member benefits. CVS Caremark, its PBM of the past 10 years, has been playing a key role in managing pharmacy benefits for health plans.

But these segments are under pressure as healthcare economies change. Value-based care likely will impact prescriptions in yet-unpredictable ways. Pharmaceutical prices remain high and under increasing federal attention, and even though drug retailers such as CVS are not the prime beneficiaries of high drug prices, they are likely to see margins squeezed.

Recent news suggests that pressure from Amazon, which has received wholesale pharmacy licenses in 13 states over the past year. That will increase the pressure on pharmacy companies, which depend on traffic from sales of medicine.

Amazon\u2019s growing interest in wholesale pharmacy activities has only been recently reported, but this was not lost on CVS. It\u2019s another indication that it will face more competition for prescription dollars, and reductions in traffic to its brick and mortar stores could impact sales in other areas of the store, which often carry high margins.

The CVS-Aetna combination could help create a closed system whereby the drug retailer could incentivize those covered by Aetna to have prescriptions filled at CVS pharmacies. A range of other incentives could be created to offer incentives to use urgent care services, flu shots and more at the pharmacies.

A range of new economic pressures could emerge from this combination, others that it may precipitate, and the result of Amazon deciding to make a splash in what has been perceived as the traditional pharmacy arena, similar to what it\u2019s sought to do in retail grocery through its acquisition of Whole Foods earlier this summer.

Perhaps the most crucial question is whether this combination will be seen as anti-competitive by federal regulators. It will be difficult to compare this to any other merger proposal that previously has been suggested, since it is the first of its kind. It will be a major test of how regulators now under the direction of the Trump administration, will view competitive behavior in such a unique combination.

Providers may be wondering if the proposed combination may impact how they prescribe medications or deliver care, particularly for those covered by Aetna. The message of the market may depend on what happens in the coming weeks, to see if other unusually similar combinations emerge.","saveContent":"The reported bid by CVS for Aetna at first looks counterintuitive. The potential acquisition of a health insurer by an company that operates brick-and-mortar pharmacies and one of the nation\u2019s largest pharmacy benefit managers is unprecedented.

For good reason, provider organizations may question the impact of these diverse industry segments on their operations, particularly whether care delivery or prescribing practices will be affected.

Making sense of the reported combination\u2014and particularly realizing its potential impact on traditional healthcare providers\u2014requires recognition of some of the outside forces impacting these two industry segments and how the interplay between them\u2014and between providers and patients\u2014is changing.

A key is looking at the market forces being brought to bear on both potential partners.

The world is rapidly changing for health insurers. For decades, much of the economic interplay in the industry has been between providers of healthcare and the entities that pay the bills. Insurers, as the holders of the premium payments and the payers of patient bills, were typically combatants with providers over how much would get paid by whom.

Health insurers have undergone significant consolidation, to the point that some of the most recent proposed mega-mergers\u2014which would have resulted in only three large health payer companies\u2014were rejected by federal regulators.

And in recent years, the very nature of healthcare reimbursement is changing. Value-based care turns incentives on end\u2014instead of reimbursement based on quantity of services (which can be argued about ad infinitum), payment is moving to an approach seeking the most value. That movement lines up the incentives for both providers and payers.

In that world, this is the beginning of questioning the role for health insurers. You can see those companies begin to slide into new and different roles. For example, in the past 10 days, Anthem announced that it is creating a new digital health platform that integrates employees\u2019 healthcare and benefits data, with the goal of engaging patients in their own care. It\u2019s just a small example, but it exemplifies the move of insurers to re-invent themselves ahead of the shift to value. Absent this re-imagination, insurers will have a new and perhaps diminished role in the healthcare ecosystem.

And now CVS, which has increasingly sought to diversify its services, ranging from in-store urgent care clinics to a program called Cigna Health Works, which aligned its clinics to specific Cigna member benefits. CVS Caremark, its PBM of the past 10 years, has been playing a key role in managing pharmacy benefits for health plans.

But these segments are under pressure as healthcare economies change. Value-based care likely will impact prescriptions in yet-unpredictable ways. Pharmaceutical prices remain high and under increasing federal attention, and even though drug retailers such as CVS are not the prime beneficiaries of high drug prices, they are likely to see margins squeezed.

Recent news suggests that pressure from Amazon, which has received wholesale pharmacy licenses in 13 states over the past year. That will increase the pressure on pharmacy companies, which depend on traffic from sales of medicine.

Amazon\u2019s growing interest in wholesale pharmacy activities has only been recently reported, but this was not lost on CVS. It\u2019s another indication that it will face more competition for prescription dollars, and reductions in traffic to its brick and mortar stores could impact sales in other areas of the store, which often carry high margins.

The CVS-Aetna combination could help create a closed system whereby the drug retailer could incentivize those covered by Aetna to have prescriptions filled at CVS pharmacies. A range of other incentives could be created to offer incentives to use urgent care services, flu shots and more at the pharmacies.

A range of new economic pressures could emerge from this combination, others that it may precipitate, and the result of Amazon deciding to make a splash in what has been perceived as the traditional pharmacy arena, similar to what it\u2019s sought to do in retail grocery through its acquisition of Whole Foods earlier this summer.

Perhaps the most crucial question is whether this combination will be seen as anti-competitive by federal regulators. It will be difficult to compare this to any other merger proposal that previously has been suggested, since it is the first of its kind. It will be a major test of how regulators now under the direction of the Trump administration, will view competitive behavior in such a unique combination.

Providers may be wondering if the proposed combination may impact how they prescribe medications or deliver care, particularly for those covered by Aetna. The message of the market may depend on what happens in the coming weeks, to see if other unusually similar combinations emerge.","order":0,"get_parent":{},"attributes":[],"attributesType":{"content":{"type":"string","source":"raw"},"lock":{"type":"object"}},"dynamicContent":""}]

Economic forces help explain a CVS-Aetna combination

More for you