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Cure or curse of medical care?

Sharona Hoffman, Case Western Reserve University

The announcement that CVS plans to acquire Aetna for US $ 69 billion generates hope and concerns.

The transaction would create a new healthcare giant. Aetna is the third largest health insurer in the United States, securing about 46.7 million people.

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CVS operates 9,700 pharmacies and 1,000 MinuteClinics. A decade ago, he also bought Caremark and now operates CVS / Caremark, a pharmacy benefit manager, a type of business that administers drug benefit programs for health plans. CVS / Caremark is one of the three largest pharmacy benefit managers in the United States. Together with ExpressScripts and OptummRXTogether, these three control at least 80 percent of the market.

Should American consumers be happy or worried about the proposed merger? As a professor of health law and bioethics, I see convincing arguments on both sides.

Good for consumers or for companies?

CVS and Aetna state that they are motivated by a desire to improve services for consumers and that the merger will reduce health care costs and improve outcomes.

Many industry experts have postulated, however, that financial gains are at the heart of the agreement.

CVS has suffered a decline in earnings as consumers turn to online drug providers. Reports that Amazon is considering entering the pharmaceutical business increase the specter of increasingly fierce competition.

The merger would provide CVS with guaranteed business by Aetna patients and allow Aetna to expand into a new health care territory.


The merger would eliminate the need for a pharmacy benefits manager because CVS would be part of Aetna.

Pharmacy benefit managers, who emerged in the early 2000s in response to increased costs of care, administer drug benefit programs for health plans. Most large employers hire benefit managers. of pharmacy that are different from your health insurers.

However, consolidation similar to that of a merger between CVS / Caremark and Aetna would be unprecedented. The country's largest health insurance company, United Healthcare, operates its own pharmacy benefits manager, OptumRx.

Pharmacy benefit managers process and pay for prescription drug claims, negotiate with manufacturers for lower drug prices, and may employ other cost saving mechanisms. Therefore, they act as intermediaries between the insurer and pharmacies.

They also earn a lot of money. They have been controversial in recent years because of the way they do it, presumably maintaining a focus more focused on benefits than on patients.

The merger has not been finalized and requires the approval of government regulators, which is not always easy to achieve. In 2016, the US Department of Justice UU He sued to block two mergers of health insurers: one between Aetna and Humana and a second between Anthem and Cigna. The government objected to antitrust motives, arguing that the mergers would unduly restrict competition. Both efforts were abandoned.

CVS and Aetna argue that their proposed merger is different. It is a vertical rather than horizontal merger, which means that it would combine companies that offer different services for patients (insurance and filling prescriptions) instead of two companies that do the same.

However, the Trump administration is currently opposing another vertical merger, that between AT & T and Time Warner. It is not clear if the administration will also oppose the CVS / Aetna merger.

Benefits of a merger

There is some evidence that a merger could help consumers.

A merger could generate more bargaining power. Combining the power of a leading pharmacy and a superior insurer may allow CVS / Aetna to more effectively negotiate discounts on the prices of drug and device manufacturers.

You could also eliminate the broker. PBMs themselves have been accused of increasing the costs of medical care. They often do not transfer negotiated discounts on drugs to consumers, but instead keep the money. In addition, many believe that "they make money through opaque reimbursements that are linked to the prices of medicines (so that their profits increase as prices do)." With the merger, CVS / Aetna would not need CVS / Caremark to function as an intermediary. Eliminating an intermediary seeking profits from the image could reduce consumer prices.

The merger could provide easy access to medical care for minor injuries and illnesses. CVS said it plans to expand its MinuteClinics clinics, without appointment, that provide treatment for nurse practitioners for minor conditions. In addition, CVS said it would offer more services, such as laboratory analysis, nutritional counseling, vision and hearing care, and more. Therefore, CVS promises that its clinics will become "health centers".

Many patients may turn to these clinics instead of seeking more expensive care from doctors or emergency rooms. In addition, health centers could offer "one-stop-shop" convenience for some patients. This could be particularly beneficial for seniors or people with disabilities.

Another benefit could be improved and the data analysis expanded, which could result in better care. Combining health insurers' information with that of their pharmacies, including purchases of over-the-counter medications, can promote better care. CVS pharmacists and health center providers could monitor and advise patients about chronic disease management, pain control, prenatal care and other issues. Such care could reduce the risk of complications and hospitalizations and, therefore, also decrease expenses.

Increase in other risks?

Skeptics argue that the CVS / Aetna merger is unlikely to result in cost savings and better results. They point out that mergers in the health care sector generally lead to higher prices, not lower ones, and worry about other adverse consequences.

If the market is reduced to fewer pharmaceutical benefit managers due to consolidation, costs may increase. The remaining pharmaceutical benefit managers may have little incentive to compete with each other by requiring discounts from pharmaceutical companies. As noted above, they can actually benefit from higher pharmaceutical prices and, therefore, increases are welcome.

After the merger, Aetna may require those who claim to use only CVS pharmacies. In addition, it may require that people turn to CVS MinuteClinics for certain complaints, even if patients prefer to visit their own doctors. Such restrictions would mean fewer options for consumers, and many may find them very distressing.

The merger could also reduce competition and prevent other companies from entering the pharmacy market. For example, Aetna may refuse to cover prescription drugs that are not purchased at CVS. In that case, Amazon may find it extremely difficult, if not impossible, to enter the industry. Less competition, in turn, often means higher prices for consumers.

 The Conversation It is difficult to predict the precise consequences of a CVS / Aetna merger. In one way or another, however, its impact will probably be significant.

Sharona Hoffman, Professor of Health Law and Bioethics, Case Western Reserve University

This article was originally published in The Conversation. Read the original article.

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