CVS buys Aetna as Amazon threatens to upend health care industry

By Health Care FOXBusiness

Potential CVS-Aetna deal preparing for potential competition from Amazon?

Kelly & Co. Managing Partner Kevin Kelly and Republican strategist Erin Elmore on reports Amazon may get into the wholesale pharmaceutical business and CVS' potential acquisition of Aetna.

U.S. retail pharmacy CVS (CVS) reached a $69 billion deal to acquire health insurance giant Aetna (AET) on Sunday, a move intended to increase convenience for consumers as Amazon (AMZN) appears to be eyeing a slice of the health care market.

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“With Amazon lurking in the wings, there is fear the entire system will upend,” Dr. Paula Muto, CEO and founder of patient-to-specialist direct access app UBERDOC, told FOX Business.

The e-commerce giant has reportedly received pharmacy-wholesaler licenses, and even held preliminary discussions with drug makers.

In the age of the internet, companies like Amazon have made transparency, access and convenience priorities among consumers. Meanwhile, the health care sector has lagged in the shift toward customer-driven models.

“Consumers are not comparing their experience between health care providers or insurance companies. Instead, they’re measuring customer experience everywhere they go. In effect, the experience at CVS and Aetna is being compared to that of Zappos, Marriott (MAR) and Nordstrom (JWN),” Ingrid Lindberg, president of loyalty marketing and customer experience consultancy at Kobie Marketing and former chief experience officer at Cigna (CI), told FOX Business.

With this in mind, the CVS-Aetna deal has wide-ranging benefits for both companies. The acquisition of Aetna will allow CVS to provide streamlined, comprehensive care to patients at their stores and clinics, improving convenience, while potentially reducing costs.

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“In these new hubs, consumers would be able not only to pick-up their prescriptions and medications, but to receive care in their neighborhood CVS stores,” Dedi Gilad, CEO and co-founder of telehealth company Tyto Care, told FOX Business, adding that CVS would also be able to leverage Aetna’s customer base.

Lindberg said the concept of a “mini fully-integrated health care system” would allow everyone to have access to all information at the patient level, improving transparency.

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The CVS-Aetna deal is just one of many the U.S. could see over the next 12 to 18 months, Gilad predicted, as the emphasis in the sector shifts toward the patient-driven model.

“Between Amazon acquiring pharmaceutical licenses in states across the U.S., to the growing adoption of telehealth technologies … the patient-doctor-pharmacy experience is shifting dramatically,” he said.

As FOX Business previously reported, Aetna customers will likely experience few near-term changes in their coverage, though over time consumers could be encouraged to visit CVS locations for care.

While the benefits of the deal appear plentiful, some experts have expressed concerns over privacy in a fully-integrated system where your insurer will not only know your medical conditions, but potentially also what you purchase at the drug store.

“Now your insurance company could know that you bought unhealthy snacks at the drugstore even though you have high blood pressure, and perhaps then charge you a premium,” Lindberg said.

The $69 billion deal values the insurance giant at $207 per share. CVS expects the agreement to save a potential $750 million in the second full-year after it passes regulatory scrutiny.

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