CVS is looking to expand its revenue when it comes to treating health. Source: NY Times

CVS Health has announced that it will be buying Aetna. The two companies confirmed the deal in a statement on Sunday. Aetna is the third largest health insurer in the US and CVS Health will put up $69 billion for the deal. Aetna shareholders will get $145 per share in cash. They will also get 0.8378 of CVS shares for every share they hold at Aetna.

The deal will be the biggest merger to happen so far in the US this year. It will bring together a health insurer and one of the biggest pharmacy retailers in the country. The acquisition is expected to close during the second half of 2018. CVS Health believes that the merger will help the company dominate the healthcare industry. The retailer hopes to transform nearly 9,700 pharmacy stores into accessible community health care centers where patients can do basic procedures and receive primary care.

This could lead to gigantic changes not just for CVS, but in the way community healthcare is perceived. Source: NY Times

Aetna’s CEO Mark T. Bertolini noted in a statement that the deal with CVS will revolutionize the healthcare industry in the US by bringing primary care closer to the community. CVS is also looking at this deal as an opportunity to diversify its income streams. At the moment, the drug retailer largely relies on retail drug sales as its main revenue stream. CVS is confident that the deal with Aetna will allow it to diversify into basic health care services targeting over 22 million Aetna customers around the country.

The healthcare industry has been undergoing rapid consolidation over the last few months. This multibillion-dollar deal will likely trigger other mergers in the sector. Analysts believe that this consolidation has largely been influenced by Amazon’s decision to enter the drug retail market. The e-commerce giant has already been a disruptive force in many sectors through its advanced e-commerce technology and logistical competency. Many players in the healthcare industry especially drug retailers like CVS Health anticipate intense competition from Amazon. As a result, the idea of pursuing mergers as a response mechanism has been very common.

Trying to help ease the congestion into emergency rooms. Source: Business Insider

CVS Health has expressed confidence that the deal with Aetna will also help customers reduce healthcare costs substantively. For example, if CVS can provide the option to use walk-in clinics for minor health issues as opposed to emergency rooms, there will be some savings accrued for the consumer. The retailer has also been a big player in negotiating drug prices with drug makers on behalf of insurers and other consumers. Merging with Aetna, one of the top three health insurance companies in the US, could give CVS an increased control over the healthcare sector.

Converting the 9,700 drug storefronts into community health hubs will be the next big step for CVS Health. Although the company will need time and resources to put up the required infrastructure for this project, it is indeed a very futuristic strategy. The $69 billion deal will likely be approved in the coming few days and it will be interesting to see just how everything plays out.