CVS Is Said to Agree to Buy Aetna, Reshaping Health Care Industry https://www.nytimes.com/2017/12/03/...buy-aetna-reshaping-health-care-industry.html CVS has agreed to buy Aetna for about $69 billion, in a deal that would reshape the American health care industry, a person briefed on the matter said on Sunday. The transaction, one of the largest of the year, would combine the drugstore giant with one of the United States’ biggest health insurers, reflecting the increasingly blurred lines between traditionally separate spheres of the health care industry. Under the terms of the deal, CVS will pay about $207 a share, said this person, who was not authorized to speak publicly about the transaction before it was announced. Roughly $145 a share of that would be in cash, with the remainder in newly issued CVS stock. An announcement could come later on Sunday. One of the biggest drivers of the deal is Amazon, which has quietly laid the groundwork for an entry into the United States’ pharmacy business. Jeff Bezos, the Amazon chief executive, and his e-commerce juggernaut have already overturned many industries: book buying, retail shopping, groceries and Hollywood, using fierce customer loyalty and enormous reach as cudgels against incumbent players. As Amazon secures pharmacy licenses across the country, traditional drug sellers have weighed ways to fight back. Wary of Amazon’s much-rumored move into the pharmacy industry, the leaders of CVS and Aetna have met several times this year, conversations that eventually led to deal negotiations.
I learned a new word today: "cudgel" I'm not really sure how a merger would solve the Amazon problem. The risk for CVS and Walgreens is that the pharmacies don't really make money. The money is made on everything between the pharmacy (in the back) and the cash register (in the front). The actual pharmacy just bring customers into the door. I find it unlikely Aetna will direct customers to CVS (away from Walgreens or a potential Amazon). Unless I am missing some part of the health insurance/pharmacy market structure - which I probably am. Who knew health insurance would be so complicated?