CVS-Aetna: What's In It For Patients?

Dec 5, 2017

CVS Health’s chief executive says the Woonsocket-based company’s $69 billion bid to acquire health insurer Aetna will be good for consumers – and Rhode Island’s governor seems to agree.

But health industry experts say there are reasons to be skeptical.

Woonsocket-based CVS Health President and CEO Larry J. Merlo said the deal, announced Sunday, would “create a platform that is easier to use and less expensive for consumers."

The deal – which needs approval from federal regulators – won praise from Gov. Gina Raimondo, who said she spoke with Merlo over the weekend about the proposed merger. “If approved, this appears to be a move that would significantly strengthen the positioning of one of Rhode Island's most important companies and could make health care more affordable and accessible in Rhode Island and across the nation,’’ Raimondo said in an e-mail from her press secretary, David Ortiz.

CVS plans to keep its Rhode Island headquarters, CVS spokesman Mike DeAngelis said Monday. And the company expects “career development and job opportunities” will open up as happened after other acquisitions, like Caremark, he said in an e-mail.

Sounds good, right?  Well, here’s what some health industry experts are worried about:

JOBS:  CVS employs 8,000 people in Rhode Island – about 5,300 at its headquarters and the rest in its 69 retail stores.  

“You have many thousands of people in Rhode Island managing many of these retail jobs,’’ Robert Laszewski, an insurance industry and health policy expert in Washington, D.C., said. “That’s where the real risk is.’’

Laszewski worked for 40 years in the health insurance industry before forming his own consulting firm, Health Policy and Strategy Associates, LLC. He said CVS is trying to position itself for the decline of its retail market – or as he puts it, the “potato chip business.”

“Retail across all markets is under enormous pressure right now,’’ he said. “Will people still be buying their pharmaceuticals in a retail store in five or six years? And if they’re not, all CVS has left is potato chip business.”

PRIMARY CARE:   CVS’s plan to expand its "MinuteClinics could increase badly-needed access to primary care – only not from doctors.  CVS’s Minute Clinics are staffed largely by physician assistants and nurse practitioners, who are less expensive than doctors.  And with a shortage of primary care doctors, CVS can capitalize on the demand for primary care.  Rhode Island is one of 23 states and the District of Columbia that grant nurse practitioners what’s known as full-practice authority, which allows them to provide all the services they’ve been trained and certified to deliver.

Robert Hackey, a professor of health policy and management at Providence College, said “what this merger potentially signals is a growing influence and impact of non-physician providers, physician assistants, pharmacists, nurse practitioners, in the delivery of care.”

PRIVACY:   A CVS-Aetna combination would consolidate a tremendous amount of consumers’ health information. That creates opportunities – and risks.  If Aetna, for instance, knows a customer is buying a lot of pregnancy test kits, that might tip the company off to the customer's plan to have a baby. And the company might use that information try to sell their customer prenatal vitamins. But access to all that health information also carries risks.  “Having more consumer health information under one roof, the stakes are higher,” said Hackey. “The need to protect against data-hacking, for example, which has happened with several large insurance companies…so I think corporate information security is going to be a top priority.’’

DRUG PRICES:  The CVS-Aetna deal would bring Aetna’s business from pharmacy benefits managers, or PBMs, which negotiate prescription drug benefits on behalf of health plans, under the CVS roof.  Created during the 1980s, these middlemen were supposed to leverage their negotiating clout with drug manufacturers to extract savings for insurers. But PBMs morphed into another big business vying for a share of consumers’ health care dollars, according to an analysis by Kaiser Health News. And the discounts they extract from drug makers, the report said, have rarely, if ever, been passed along to consumers.

THE AMAZON EFFECT: CVS’s drive to buy Aetna is what many health industry observers have described as the Amazon effect, meaning the company's need to compete with online retail sales and the potential for online pharmacy sales.  But Laszewski, the Washington, D.C.- based consultant, says that CVS faces an even bigger competitive threat than the one from Jeff Bezos. If Washington lawmakers like Rhode Island’s U.S. Sen. Sheldon Whitehouse can succeed in mounting enough political clout for something resembling a single-payer health system – perhaps in the form of an expanded Medicare program – Amazon’s ability to undercut drug prices could have a much bigger competitor. “Amazon is playground material,’’ he said, “compared to what Uncle Sam can do in that space.”

-with reports by RIPR's John Bender