In a blockbuster deal that is certain to shake up the healthcare industry, CVS has reached an agreement with Aetna to purchase the health insurer for $69 billion.
A potential tie-up between the companies has been rumored since October, and they were reportedly in the final stages of negotiations late last week. CVS and Aetna finalized the deal Sunday, The Wall Street Journal reported. Aetna stockholders will receive $207 per share, $145 in cash and $62 in stock as part of the deal.
The merger—which will marry one of the country’s largest pharmacy services chains with one of the largest for-profit health insurers—has potential benefits for both parties. For Aetna, it could help offset headwinds like low margins in its commercial business and allow it to better compete with other insurers that boast in-house pharmacy benefits managers, including UnitedHealth and as of 2020, Anthem.
For CVS, the deal could help it fend off the threat of Amazon’s potential entry into the drug supply chain and pressures on its PBM business—both from competitors like Optum and increased regulatory scrutiny.
However, the deal isn’t without obstacles. Not only will the two companies face the task of integrating two very different businesses, but they will also have to secure regulatory approval. That will likely require both CVS and Aetna to divest some of their Medicare Part D covered lives.
Another potential red flag is the Department of Justice’s decision to challenge the deal between AT&T and Time Warner, a similarly vertical transaction that one antitrust attorney said “provides a roadmap of how mergers of this type can harm competition,” FierceHealthcare has reported.
Meanwhile, the insurer Aetna previously tried to acquire—Humana—could be exploring another major transaction. A recent SEC filing from the Medicare Advantage-focused insurer suggests that it could be readying for a sale, according to one analyst, who predicted Cigna would be the most likely buyer.