Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

4-Traders Homepage  >  Equities  >  Nyse  >  CVS Health    CVS

Mes dernières consult.
Most popular
News SummaryMost relevantAll newsofficial PublicationsSector newsTweets

CVS Health : What CVS's acquisition of Aetna could mean

share with twitter share with LinkedIn share with facebook
share via e-mail
10/28/2017 | 01:03pm CEST

SAN FRANCISCO – A possible $66 billion takeover of health insurer Aetna by CVS Health could lower costs to both companies, leading to the hope that at least some savings might be passed through to patients – or it could be a sign that for a long-standing player in the medicine game, "the jig is up."

On Thursday, the Wall Street Journal, citing unnamed people who said they are familiar with the situation, reported CVS Healthcare was in talks to acquire Aetna for more than $200 per share. Representatives of both companies declined to comment on the report.

While at first glance, a bid by CVS, with its 9,000 national pharmacies, for Aetna might seem like the mouse swallowing the cat, it's actually the opposite. The market capitalization of CVS is currently about three times that of Aetna, approximately $180 billion versus $60 billion.

There are other facets to its business that make an insurance company an interesting target for a pharmacy, experts say.

Pharmacy benefit management

An important part of CVS' business is CVS Caremark, the pharmacy benefit management subsidiary of CVS Health. Pharmacy benefit management companies work with insurers to decide which drugs are most beneficial and cost-efficient. They also negotiate discounts from drug manufacturers.

"Aetna participants are likely to see the most benefit ... because CVS would be maybe able to offer them lower co-pays if they shop with them," said Joseph Agnese, a senior analyst with investment research firm CFRA.

Agnese says don't expect the deep discounts, but he adds that "the more (CVS) is purchasing, the better the deals they'll be able to get (from drug companies)."

CVS Caremark has the expertise and access to customers' pharmaceutical information and medical needs, so it makes sense that the company would want to expand that to include not just pharmacy, but full health care, says Mohamed Jalloh, a spokesman for the American Pharmacists Association.

"It could be that they're trying to expand their service and extend the pharmacy insurance benefit to insuring everything," said Jalloh.

Not everyone is convinced prices could come down for customers.

In a time of rising health care costs and bitter partisan fights over insurance and accessibility, the potential merger may mean more savings for the companies than individual users.

The merger is in many ways an indication for the pharmacy benefit management (PBM) industry "that the jig is up," said Adams Dudley, a professor of medicine and health policy at the University of California, San Francisco.

"The idea of a PBM was that they would negotiate really well and really hard with the drug companies and that the insurers didn't have the knowledge or the bandwidth to do that," said Dudley, who directs the UCSF Center for Healthcare Value.

"But it's become apparent that they're not saving people money because they keep all the profits themselves. People are suddenly realizing that if PBMs make a lot of profit, it just jacks up drug prices. It's completely the opposite of what we thought they would do," Dudley said.

The merger wouldn't likely save much money for consumers, in the opinion of Aaron Katz, an expert on health policy at the University of Washington's school of public health.

That doesn't necessarily mean it wouldn't save money for the companies. "Larger entities tend to be tougher negotiators over price and contracts," said Katz.

While the proponents of health company mergers often cite the cost savings of merged systems and the benefit to consumers, "I haven't seen much convincing evidence myself," said Katz.

Frustration over the unrealized savings that PBMs were supposed to bring could be a reason for CVS Healthcare to look into widening its reach to a broader swath of health care, should the lucrative PBM business go away.

"They skim an awful lot off the top. Their administrative profits are very high and that might not be sustainable in the future," Dudley said. As an example, he noted the low prices big box stores such as Costco are able to offer because they purchase directly from the manufacturers, saving the cut the PBMs were taking.

CVS is already on its way to expanding its offerings. The company currently runs more than 1,000 MinuteClinics staffed by nurse practitioners and physician assistants who can provide basic health care for walk-in patients.

For Aetna, mergers are a road it's been down. Two years ago it agreed to buy Louisville, Ky-based insurer Humana for $34 billion. However, the deal was abandoned earlier this year due to regulatory concerns.

Follow USA TODAY reporters Marco della Cava and Elizabeth Weise on Twitter.

© © 2017 Journal Media Group, source Newspapers

share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on CVS HEALTH
02:46pCVS HEALTH : Underscores Commitment to Safe Medication Disposal Ahead of Nationa..
04/25CVS HEALTH : expands safe drug disposals in Ohio
04/25CVS HEALTH : Foundation Awards Grant to Leahy Clinic
04/25CVS HEALTH : Releases 11th Annual Corporate Social Responsibility Report
04/24CVS HEALTH : MSDE DORS, CVS Health to Honor First Graduates of Retail Training P..
04/24CVS HEALTH : expands safe drug disposal at CVS Pharmacy locations in Ohio to hel..
04/24Glenview's Robbins says talk of Amazon's entering pharma is overblown
04/23Humana, PE firms to buy hospice operator Curo Health for $1.4 billion
04/20CVS HEALTH CORPORATION : To Hold First Quarter 2018 Conference Call
04/20CVS PHARMACY : Offering Hepatitis A Vaccine to Kentuckians Following an Increase..
More news
News from SeekingAlpha
04:15pCVS HEALTH : A Store-Level Look At The Proposed Healthcare Giant 
04/21THE PASSIVE DGI CORE PORTFOLIO : Income, Safety, And Growth 
04/20Vilas Fund, LP Q1 '18 Letter To Partners - #28 Since Inception, Long Pharma 
04/1910 Dividend Growth Stocks For April 2018 
Financials ($)
Sales 2018 189 B
EBIT 2018 10 003 M
Net income 2018 5 761 M
Debt 2018 20 873 M
Yield 2018 3,18%
P/E ratio 2018 12,46
P/E ratio 2019 11,09
EV / Sales 2018 0,47x
EV / Sales 2019 0,44x
Capitalization 67 568 M
Duration : Period :
CVS Health Technical Analysis Chart | CVS | US1266501006 | 4-Traders
Technical analysis trends CVS HEALTH
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 23
Average target price 87,9 $
Spread / Average Target 30%
EPS Revisions
Larry J. Merlo President, CEO & Non-Independent Director
David Wyatt Dorman Chairman
Jonathan C. Roberts Chief Operating Officer & Executive Vice President
David M. Denton Chief Financial Officer & Executive Vice President
Troyen A. Brennan Chief Medical Officer & Executive Vice President
Sector and Competitors
1st jan.Capitalization (M$)
CVS HEALTH-8.14%67 568