What The $69 Billion CVS-Aetna Merger Means For Health Retail — And Amazon

Pharmacy and clinic chain CVS Health’s $69 billion acquisition of insurance giant Aetna appears poised to upend the way consumers access and pay for wellness, medication, treatment, and benefits.

As part of the larger implications for the healthcare industry, the deal, which was announced on Sunday,  also portends changes in the way pharmacies, doctors, and insurers deliver those services — and the way local consumers find and interact with those providers.

The merger comes as wider changes in the pharmaceutical space were occurring. Over the past few years, a number of startups began exploring the pharmacy retail space.

Even more than retail, transportation, and banking, healthcare is now experiencing the largest shift in consumer and marketing behavior as a result of mobile technology. For example, last year Capsule, which bills itself as a “next-generation pharmacy,” launched in New York City to challenge the traditional pharmacy model by promising consumers that its “predictive inventory management” will always have a users’ medication in stock right before their refill.

Companies like Capsule only the tip of the expected entry of Amazon to the  pharmacy space following its $13.7 billion acquisition of Whole Foods this past summer.

For the most part, the alignment of CVS and Aetna has clear affinities in terms of brick-and-mortar locations as well as the analytics associated with health and wellness marketing. Plus, there is an obvious complementary quality of two very different healthcare verticals coming together that will alter the nature of pharmacies and insurance, even as sweeping changes appear headed for the Affordable Care Act.

In heralding the combination of CVS and Aetna, CVS Health President and CEO Larry J. Merlo said, “This combination brings together the expertise of two great companies to remake the consumer health care experience. With the analytics of Aetna and CVS Health’s human touch, we will create a health care platform built around individuals… integrating more closely the work of doctors, pharmacists, other health care professionals, and health benefits companies to create a platform that is easier to use and less expensive for consumers.”

In terms of the brick-and-mortar space, the deal brings together more than 9,700 CVS Pharmacy outlets and the 1,100 MinuteClinic walk-in centers, which offer physician services in CVS and Target locations.

CVS will also connect Aetna to  Omnicare’s senior pharmacy solutions, Coram’s infusion services, as well as the more than 4,000 CVS Health nursing professionals providing in-clinic and home-based care. “As a result, there will be a better opportunity to utilize local care solutions in a more integrated fashion with the goal of improving patient outcomes,” CVS said.

Aside from Amazon, the deal will put added pressure on CVS’s closest rival Walgreens. To be sure, Walgreens has been preparing for this moment. Walgreens has struck alliances with insurers such as UnitedHealth Group’s OptumRx pharmacy benefit manager.

In April, Walgreens expanded its partnership with pharmacy benefit manager Prime Therapeutics, which is owned by 14 Blue Cross and Blue Shield health plans, to create 230 “specialty pharmacies” in Minnesota, Nebraska, New Mexico, and Texas. That project will likely be expanded quickly in response to CVS and Aetna.

Once CVS and Aetna finish plotting the integration, one challenge further down the road will be ensure that consumers are aware of which locations offer certain services.

Most people find their pharmacies, doctors, and healthcare providers through a variety of different paths. While people might look to a pharmacy that’s close proximity to where they live or work,  they find their healthcare provider either through their employer, combing through marketplace plans, searching online, or word-of-mouth. People have typically discovered physicians through referrals or media reports such as US News and New York Magazine.

By consolidating the marketing of CVS’s and Aetna’s varied services and locations into a single entity, they’ll have to find ways to manage reviews, SEO, and advertising in ways that showcase the “one-stop-shop” with the specific details that give consumers confidence.