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A CVS and Aetna Deal: Personalization, Integration, and Transformation

With the rumored potential for a CVS and Aetna deal initiating a flurry of perspective and ripples through the market, Clarkston Consulting brought together our industry leading consultants to share their insights on the potential deal. Looking at the merger from various angles, one thing is very clear; this represents a significant opportunity for CVS to consolidate ownership and drive personalization in healthcare in response to a variety of industry trends, including:

  • To combat the Amazon effect, or the way Amazon is successfully disrupting many industries because of how they have been able to own the relationship with the consumer;
  • To lead the healthcare industry, by offering solutions to escalating costs and limited choices by delivering patient-centric products and services;
  • To drive improved patient outcomes, whereby CVS takes ownership of the patient data and put that information to use on a more personalized level; and
  • For Aetna to craft tailored insurance plans, by orchestrating the data to mitigate risk and offer more cost effective insurance solutions.

We brought together several experts from Clarkston Consulting to weigh in on this topic.  Steve Rosenstock our Consumer Products Industry Lead, Evan Shirley a strategy and innovation consultant, and Megan Weldon our Consumer Healthcare Lead, discussed each of these factors as they relate to the CVS and Aetna deal.

Amazon is successful in disrupting many industries because of their ability to own the relationship with the consumer.

Amazon. What conversation that involves industry disruption doesn’t have Amazon’s name attached to it? The disruption that Amazon has created across industries has resulted in countless boardroom discussions, challenging the norms of operations and the entire value chain. Cross-industry merger and acquisitions (M&A) activity that has become commonplace is almost always designed as a method to combat the Amazon effect. The CVS and Aetna deal is only the most recent example. This move represents an ability for CVS and Aetna to create their own disruption, transforming healthcare, and using this key advantage to compete with Amazon in the long-term.

This is an attempt by CVS to lead the healthcare industry by offering a solution to escalating costs and limited choices by delivering patient-centric products and services.

What is the motivator for CVS Health? Disruption to the traditional healthcare model. Like the best innovators, CVS is disrupting by focusing on creating solutions for their patients most difficult problems. It’s apparent in the CVS Health strategy, as mentioned in their annual report, “This annual report describes some of the ways in which our model allows us to enhance access, improve health outcomes, and lower overall health care costs, while positioning CVS for long-term growth.” If CVS were to buy Aetna, that deal would take them one step closer to vertical integration (i.e. health insurer, pharmacy benefits manager, and dispenser) and would strengthen their relationship with the patient. As a result, CVS would have a greater degree of control over care coordination, and patient outcomes.

“There are examples of combined insurance/PBMs: UnitedHealth and PBM Optum; Anthem and PBM IngenioRx, as well as PBM/dispenser examples (CVS/Caremark). A combined CVS and Aetna deal would gain leverage on wholesalers via increased buying power. They’d also gain leverage on manufacturers (insurer/PBM/dispenser integration = more control of the formulary for more patients, and greater control of market access). Think of it as an insurer’s entry into retail pharmacy. ” – Evan Shirley

This deal would enable CVS Health to influence improved patient outcomes by taking ownership of the patient data and putting that information to use.

Ownership and access to data is important, but putting the insights to use is a differentiator. This deal would incent the more than 23 million people in the Aetna insurance universe to get drug products dispensed through CVS, rather than Walgreens or Amazon. That would be an invaluable amount of data to garner insights about the patient journey. This data would then enable CVS and Aetna to manage outcomes in a way that traditional insurers, prescribers, and pharmaceutical companies cannot. By owning the data, CVS can tailor health plans and own the health economics market, which is critical to the transformation to value-based care.

Aetna can tailor and craft health plans, transitioning to personalization and individualization of plans, to reduce and manage risk.

Both CVS and Aetna have stated goals to get closer to the patient. A tailored health plan could incent behaviors which keep a patient healthy proactively, rather than the traditional focus on the disease area. CVS and Aetna can uniquely address this opportunity in a combined entity because of the value of the patient and product data. This may also force more companies to become more patient-centric to compete in the market. In addition, going beyond patient centricity, combining patient data, with consumer data, CVS is in a unique position to tailor personalized health regimes with both prescribed, over-the-counter, and consumer purchases with the centralization of that data.

Impacts of a CVS and Aetna Deal

We recognize there is a lot of debate about the impacts of a potential CVS and Aetna deal, but the potential impact to the traditional channels and business models warrants a discussion, whether this acquisition becomes a reality or not.  The ability for CVS Health and Aetna to consolidate ownership and improve personalization would have tremendous impacts throughout the healthcare value chain, but there is much that is yet to be determined. Still, it is our position that the healthcare industry requires more forward-thinking strategies and actions with the patient in mind, and companies who are willing to challenge the status quo.

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Tags: Competitive Differentiation & Execution, Life Sciences Trends, M&A