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Why CVS / Aetna could be a game changer, and who is next can surprise you



On Monday, the chain of pharmacies CVS (CVS) agreed to pay $ 69 million in cash and shares for health insurance provider Aetna Inc. (AET) . The merger could change the way patients receive non-critical care, as the company would become a provider and insurer. It could also trigger a chain reaction of similar offers.

It's an interesting concept. The neighborhood pharmacy has slowly been taking on some of the qualities of a health care clinic. For example, many of us are already there to get vaccinated against the flu, something that had not been heard years ago. Visits for diabetes consultations have also become commonplace.

What CVS seeks to do with this deal is to dramatically accelerate that process and change the nature of the neighborhood pharmacy. For example, we already know that getting a flu shot at the pharmacy is more convenient than arranging an appointment with a doctor.

What happens if a full range of services is available at the pharmacy? Better yet, what if it costs less to have those services at the pharmacy? The advantage for the provider is clear; send the patients to the pharmacy, and free the doctors for more pressing needs.

Of Aetna's competitors, which is the most likely to be acquired later? Anthem (ANTM) is a possible target. The company has a similar market limit ($ 57.75 billion) for Aetna, and had already signed a pharmacy administration agreement with CVS called IngenioRx. Now that CVS plans to acquire Aetna, Anthem will most likely end the IngenioRX relationship.

Humana (HUM) is another name that could see some action. With a market cap of $ 36 billion, Humana may be easier to swallow than some of the biggest names in the industry. Last month's layoffs at the company may have been destined to pave the way for a merger.

It is known that Cigna (CI) is open to a merger; the company tried to join Anthem earlier this year, but the deal was brought down due to antitrust concerns. However, an agreement with a pharmaceutical company, or even a player seeking to enter that arena, such as Target (TGT) could change that result.

Both CVS and Aetna traded down on the news on Monday. In fact, the entire health care group suffered a severe blow, with Anthem losing 3.21

% and Humana with 2.46%. Keep in mind that, simply because Wall Street does not like the sector now, does not mean that the CVS / Aetna merger will not take place or that similar transactions will not be made in the future.


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