CVS Health to Buy Aetna for $69 Billion

CVS Health said on Sunday that it had agreed to buy Aetna for about $69 billion in a deal that would combine the drugstore giant with one of the biggest health insurers in the United States and has the potential to reshape the nation’s health care industry. The transaction, which has been rumored for a while, is one of the largest of the year. According to both companies, it fills an unmet need in the current health care system and presents a unique opportunity to redefine access to high-quality care in lower cost, local settings whether in the community, at home or through digital tools.

“This combination brings together the expertise of two great companies to remake the consumer health care experience," said Larry J. Merlo, president and CEO of CVS Health, in a statement. “With the analytics of Aetna and CVS Health's human touch, we will create a health care platform built around individuals.” Aetna CEO Mark Bertolini will step down after the insurer is acquired by CVS Health Corp.

Total Retail's Take: What possible interest could the owner of the neighborhood drug store have in an insurance giant? Like most everything else in retail today, it largely comes down to Amazon.com. How so? While Amazon has long sold over-the-counter items like aspirin and contact lens solution that people typically get at drug stores, the requirement that patients go to a pharmacy for prescription drugs has always meant a steady stream of foot traffic for retail pharmacies — traffic that Amazon has never had. However, in October Amazon won approval from 12 states to become a wholesale drug distributor. By acquiring Aetna, CVS will have even stronger bargaining power with major pharmaceutical companies. It will also be able to remain competitive against a potential Amazon entry into pharmaceuticals. And even if Amazon opts against selling prescription drugs, the Aetna deal could give CVS a big advantage to gain market share over Walgreens, Wal-Mart, and any other business that operates a pharmacy. Beyond Amazon, the move would be a logical progression for CVS, which has been transforming itself into a health care business for years. It acquired its Caremark pharmacy benefit manager platform in 2006, for example, and in 2014 it changed its name from CVS Caremark to CVS Health. What’s more, CVS and Aetna have already begun to test a relationship, having signed a contract to work together in 2010.