CVS-Aetna deal to change how big employers buy health benefits

NEW YORK (Reuters) – CVS Health Corp’s (CVS.N) proposed purchase of Aetna Inc (AET.N) will change the way many major U.S. corporations buy health coverage for employees and raise new questions over the cost of those benefits, benefit consultants said.

FILE PHOTO – A customer waits at the counter of a CVS Pharmacy store in Pasadena, U.S., May 2, 2016. REUTERS/Mario Anzuoni/File Photo

CVS on Sunday said it planned to buy Aetna for $69 billion.

Most national companies employing more than 20,000 people keep their prescription drug benefits separate from medical coverage. They believe they are paying less by shopping those contracts around to competitors within each industry.

CVS and Aetna argue that their deal will lower healthcare costs for employees of their large corporate customers, giving the company greater clout to negotiate down drug prices and better manage the use of those medicines.

“It’s the lower overall cost of therapy. It’s not just the drugs. It’s not just the PBM (prescription benefit manager). It’s the overall outcome for the patient,” Aetna CEO Mark Bertolini told Reuters in an interview.

But employers are expected to scrutinize that kind of claim closely, according to benefit consultants in touch with hundreds of large employers.

So far, they are taking a “wait-and-see attitude as to whether there is a direct favorable impact on their pricing” of a CVS-Aetna combination, said Jim Winkler, senior vice president for health at Aon, part of Aon Plc (AON.N).

Last year, large employers’ concerns over two proposed mergers between health insurers Aetna and Humana Inc (HUM.N) and between Anthem Inc (ANTM.N) and Cigna Corp (CI.N) were a major factor in U.S. antitrust regulators blocking the deals.

Industry experts say that is less likely to happen with CVS-Aetna because of their minimal direct overlap, historically the main concern for customers. “By and large they are in separate places in the value chain, so it’s more of a vertical integration,” said Winkler.

CVS is the No. 2 U.S. provider of prescription drug benefits and competes with larger rival Express Scripts Holding Co (ESRX.O). Aetna is the nation’s No. 3 health insurer, competing against UnitedHealth Group Inc (UNH.N), Anthem and Cigna to provide coverage for doctor and hospital visits.

A NEW LANDSCAPE

A combined CVS-Aetna will reorder those options, leaving Express Scripts as the only standalone company big enough to easily provide pharmacy benefits to…

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