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Spooked by Amazon, CVS Decides to Buy Massive Health Insurer Aetna

Spooked by Amazon, CVS Decides to Buy Massive Health Insurer Aetna
From Gizmodo - December 3, 2017

E-commerce giant Amazons power has steadily grown to the point where it can flash-fry competitors just by pointing its fearsome gaze in the general direction of their retail sector, like a magnifying glass aimed at ants or a really efficient Eye of Sauron. Now its eyeing moving into the pharmacy sector, and competitors are sufficiently freaked out that theyre taking drastic measureslike CVS, which the New York Times reports has struck a fairly unprecedented deal to purchase health insurance company Aetna for $69 billion.

Per the Times, the pharmacy chain has agreed to pay about $207 per share for Aetna, $145 of it in cash and the rest in shares. The Washington Post wrote that the move is intended to turn CVSs 9,700 pharmacy storefronts into community medical hubs for primary care and basic procedures, as well as broaden its revenue base so that it is not quite as reliant on retail sales.

Proponents say the deal could lower health care costs by allowing customers to see nurses and pharmacists at lower prices than in a hospital, such as providing follow-up and monitoring to patients recently released from hospital, per the Post. It could presumably also lower drug prices somewhat for participants in the insurance program who fill their prescriptions at CVS stores.

On the other hand, continued consolidation in the industry could lead to higher prices and fewer choices in the market overall at a time when the health care industry is already unstable. Carnegie Mellon University economics and health policy professor Martin Gaynor also told the Post he was unsure whether the combined company was necessary, or if CVS was just seeking a short-term bump in stock prices.

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