• by Thom Forbes  @tforbes, October 27, 2017

In a move partially driven by the looming threat of Amazon’s encroachment on its turf  — what isn’t nowadays? — news leaked yesterday that Woonsocket, R.I.-based CVS Health is in serious talks to acquire Hartford, Conn.-based Aetna Inc. for $66 billion.

“A successful deal could push millions of Aetna's members toward CVS's retail pharmacies, walk-in MinuteClinics and home services for infusion drugs at a time when retail pharmacy companies are facing stiff competition,” points out Carolyn Y. Johnson for the Washington Post.

“It would also give Aetna the ability to move deeper into the lives of the 44.7 million people it serves and manage their health care more efficiently. For example, the insurer might be able to create better coordination of care using insights from CVS's retail clinics and pharmacies,” Johnson continues.

But, as Dana Mattioli, Sharon Terlep and Anna Wilde Mathews state in their news-breaking report in the Wall Street Journal, the talks come “as the drugstore giant scrambles to fortify itself against looming competition from Amazon.com amid a continuing reordering of the health-care industry.”

Although a deal is not certain, “in a sign of their seriousness, the companies’ respective chief executives — Larry Merlo at CVS and Mark Bertolini at Aetna — have met multiple times over a period of roughly six months, one of its sources “familiar with the matter” tells them.

In a sidebar, the WSJ’s Terlep and Laura Stevens write: “Health-care industry officials say the pharmacy market is ripe for e-commerce, much like book selling was, especially if Amazon can provide the kind of one-click convenience it offers for books, clothes and other products.” 

They also point to a St. Louis Post-Dispatch report yesterday that Amazon has obtained approval from pharmaceutical boards in at least 12 states to become a wholesale distributor. 

“It’s unclear, though, whether the regulatory filings support speculation that the e-commerce giant is planning a move into the prescription-drug delivery business, territory currently dominated by a handful of companies,” writes the Post-Dispatch’s Samantha Liss. “Industry analysts in recent weeks have raised the possibility that Amazon was eyeing this lucrative new business, posing a potential threat to such companies as north St. Louis County-based Express Scripts Holding Co.,” which is the largest pharmacy benefit management (PBM) organization in the country.

PBMs “such as CVS negotiate drug benefits for health insurance plans and employers, and have in recent years taken an increasingly aggressive stance in price negotiations with drugmakers,” write Carl O'Donnell and Greg Roumeliotis for Reuters. “They often extract discounts and after-market rebates from drugmakers in exchange for including their medicines in PBM formularies with low co-payments. A tie-up with Aetna could give CVS more leverage in its price negotiations with drug makers. But it would also subject it to more antitrust scrutiny.”

As for consumers, “at least some savings might be passed through to patients,” write Elizabeth Weise and Marco della Cava for USA Today. “Aetna participants are likely to see the most benefit … because CVS would be maybe able to offer them lower co-pays if they shop with them,” Joseph Agnese, senior analyst at CFRA Research, tells them.

But the deal faces several hurdles besides the antitrust factor, as Bob Herman suggests for Axios, including the fact that “CVS just signed a deal with Anthem, a major insurance competitor to Aetna.” 

There’s also “the Trump wild card,” Herman writes. The President “made it clear in his latest executive order that his administration will ‘focus on promoting competition in health care markets and limiting excessive consolidation.’ The CVS-Aetna deal is a direct challenge to that order.”

Meanwhile, as uncertain as Amazon’s specific intentions in the health-care market may be, “the prospect of the giant Internet retailer entering the business is beginning to cause far-reaching reverberations for a range of companies, roiling the shares of drugstore chains, drug distributors and pharmacy-benefit managers, and potentially precipitating one of the biggest corporate merger deals this year,” writeBloomberg’s Robert Langreth, Jared S Hopkins and Spencer Soper.

“Size and scale-wise, they can disrupt anywhere they want to disrupt,” Chip Davis, president of the Association for Accessible Medicines, a trade group for generic medication, tells the Bloomberg reporters.

So Is the time coming when your kid’s Wooden Melissa & Doug Grocery Store and Lemonade Stand (purchased from Amazon.com, of course, at a 23% discount), faces competition from an Amazon drone delivering an app-ordered, freshly squeezed by a robot, 16-oz. Meyer lemonade with enhanced water, flavored with organic stevia, in 10 minutes flat at half the price?