CVS on Sunday said it planned to buy Aetna for $69 billion.
Most national companies employing more than 20,000 people keep their
prescription drug benefits separate from medical coverage. They
believe they are paying less by shopping those contracts around to
competitors within each industry.
CVS and Aetna argue that their deal will lower healthcare costs for
employees of their large corporate customers, giving the company
greater clout to negotiate down drug prices and better manage the
use of those medicines.
"It's the lower overall cost of therapy. It's not just the drugs.
It's not just the PBM (prescription benefit manager). It's the
overall outcome for the patient," Aetna CEO Mark Bertolini told
Reuters in an interview.
But employers are expected to scrutinize that kind of claim closely,
according to benefit consultants in touch with hundreds of large
employers.
So far, they are taking a "wait-and-see attitude as to whether there
is a direct favorable impact on their pricing" of a CVS-Aetna
combination, said Jim Winkler, senior vice president for health at
Aon, part of Aon Plc <AON.N>.
Last year, large employers' concerns over two proposed mergers
between health insurers Aetna and Humana Inc <HUM.N> and between
Anthem Inc <ANTM.N> and Cigna Corp <CI.N> were a major factor in
U.S. antitrust regulators blocking the deals.
Industry experts say that is less likely to happen with CVS-Aetna
because of their minimal direct overlap, historically the main
concern for customers. "By and large they are in separate places in
the value chain, so it's more of a vertical integration," said
Winkler.
CVS is the No. 2 U.S. provider of prescription drug benefits and
competes with larger rival Express Scripts Holding Co <ESRX.O>.
Aetna is the nation's No. 3 health insurer, competing against
UnitedHealth Group Inc <UNH.N>, Anthem and Cigna to provide coverage
for doctor and hospital visits.
A NEW LANDSCAPE
A combined CVS-Aetna will reorder those options, leaving Express
Scripts as the only standalone company big enough to easily provide
pharmacy benefits to top employers.
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Aon's Winkler expects this will lead large companies to turn to
their insurer for pharmacy benefits the same way mid-sized companies
have. About 63 percent of large corporations use a separate pharmacy
benefit company, consultant Mercer's 2016 employer survey found.
In scale, CVS and Aetna offer a much bigger pharmacy benefits
manager than UnitedHealth, which expanded its OptumRx business with
the $13 billion purchase of Catamaran in 2015.
Anthem in October said it would expand its own pharmacy benefits
business, and hired CVS to help do so. That partnership could be
thrown into jeopardy by the new Aetna agreement, health industry
analysts said.
Insurers say combining the two benefits saves money. Large employers
who combine the benefits under one insurer have begun to demand
insurers hit a specific dollar figure of medical cost savings per
member, per year, said David Dross, national pharmacy practice
leader at Mercer, part of Marsh & McLennan Co. <MMC.N>.
Insurers may also try to make it more pricey for large companies to
keep the benefits separate.
Some have started charging mid-size corporate customers, who employ
2,000 to 10,000 people, additional fees for integrating medical
claims and pharmaceutical claims when they are managed by different
companies, Dross said, and could require those fees for larger
clients as well.
"The plans have sort of decided this is the model we need to move to
now," Dross said. He expects that next year, as large companies
negotiate their benefits contracts, they will be asking much more
than in the past "will a carve-out option look better, or does the
carve-in option look better?"
(Reporting by Caroline Humer; Editing by Michele Gershberg, Meredith
Mazzilli and Sandra Maler)
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