At least for the time being, the official word is that the news that the parent company of the US-based CVS drugstore chain is to acquire Hartford, Connecticut-based Aetna Inc won’t affect Aetna’s large and growing international operations.
The deal, formally announced on 3 December, is technically being called a “definitive merger agreement”. According to a statement issued by the companies, it will see CVS Health acquire all of the outstanding shares of Aetna, in exchange for a combination of cash and stock.
The transaction values Aetna at approximately US$207 per share or approximately US$69bn, or US$77bn, if Aetna’s debt is included.
The deal needs the approval by the two companies’ shareholders as well as the respective regulators, and is not expected to close until sometime next year at the earliest.
But the acquisition/merger remains the subject of considerable speculation, in the US especially, where its promise to create community-based hubs at the roughly 10,000 stores that CVS now operates – where consumers would be able to access certain basic healthcare in addition to picking up medicines, toothpaste and other drugstore staples – is attracting comment.
The US healthcare market is, of course, already in a state of high disruption as a result of the Obama administration’s efforts to introduce a form of subsidised healthcare, which was followed by the current president’s efforts to dismantle it.
CVS is not as international – at least yet – as some other US retailers, but does have an unknown, as this article was going to press, number of retail units in Brazil and Puerto Rico, according to its website.
In their announcement of the deal, Aetna and CVS said that Aetna will operate as a stand-alone business unit inside of the CVS Health corporate entity, and will be led by members of its current management team.
Consumers, it added, “will benefit from a uniquely integrated, community‐based health care experience.
“The combined company will also be able to better understand patients’ health goals, guide them through the health care system, and help them achieve their best health.
CVS Pharmacy locations will include space for wellness, clinical and pharmacy services, vision, hearing, nutrition, beauty, and medical equipment, in addition to the products and services our customers currently enjoy.”
A New York Times analysis the day after the merger was announced noted that Aetna and CVS were hoping that, “by overseeing patients’ medical benefits as well as their pharmacy benefits”, they would be better able to “coordinate treatments for customers”.
“Instead of getting lost in what Aetna’s chief executive Mark Bertolini, describes as the ‘rat maze’ of health care, patients could go somewhere near their home to have a chronic condition like diabetes [treated] by a nurse, or to a clinic to check out if a sore throat is strep,” the article added.
CVS, the largest retail pharmacy chain in the US, based on number of shops, already operates walk-in clinics, including some in Target stores. It also specialises in dispensing high-priced specialist drugs that require special handling, and, following an acquisition of a business known as Caremark some years back, became involved in the so-called pharmacy benefits management business, which works as a intermediary between pharmaceutical providers and insurance companies.
Will the model translate abroad
The question for the international market is whether Aetna and CVS will translate their planned model into its overseas operations.
Currently Aetna International, which is based in the UK, is one of the largest providers of international private medical insurance services, with more than 700,000 members worldwide, including expatriates, local nationals and business travellers. Its global footprint expanded in 2014, when it acquired the UK-based IPMI specialist InterGlobal.
From an international perspective, there are some similarities in the acquisition in 2015 of the UK’s drugstore giant, Boots, by America’s Walgreen’s chain – second only in size in the US retail drugstore market to CVS. But crucially, no insurance company was involved in that deal.
Back in Hartford, meanwhile, the question on many locals’ minds, especially those who work for Aetna, is whether the company will now go ahead with its planned relocation of its headquarters (pictured above) to New York City, where a new , US$85m HQ is currently under construction.
CVS has formally said it plans to review all of Aetna’s offices as part of its purchase, and has not said one way or another whether Aetna is likely to leave Hartford or stay put.
According to a recent article in the Hartford Courant, Aetna decided to go ahead with the planned relocation “despite overtures from the state and the city [of Hartford]” after the insurer announced in June that it would end its 164-year run in Connecticut.
It quoted Bertolini as explaining the move by noting that the company needed “workers in the so-called knowledge economy: software developers, data specialists and others who adapt digital technology to Aetna’s work as it pivots to a health care company”.