CVS may be buying Aetna


I know this isn’t strictly P&R, but since it involves a pharmacy company and an health insurance company, I figured things might get heated.


Man. Nothing show how distorted a market is when the third party sellers of a product offer to buy the people they charge.


How the hell would this reduce prices? It’s not like CVS is going to ask Aetna to bid against itselfx


Presumably Aetna would offer a lower co-payment for prescriptions filled at CVS.


But then how would they maintain their margins?


First, Aetna would drive more volume to CVS, which could come out ahead even with lower margins.

But on top of that, CVS would have more negotiating power with its suppliers (eg pharmaceutical companies) and might even be able to keep its margins.


This is just insane. I go through Aetna for my health insurance and I fill my prescriptions at CVS. The notion they’d potentially be the same company (well, umbrella) in the future is rather disturbing to my sense of the world, but the possible implications regarding marketplace competition seem worse. I really don’t mind insurance companies or pharmaceutical suppliers making a buck (within reason), it’s just when there’s some unholy alliance that I get a little squirrely on it.


I’m not as alarmed by this deal as some b/c although it is vertical integration, it does not include the actual medical providers, which is where the worst price gouging / exploitation of inelastic demand in health care occurs. As mentioned above, since Aetna and CVS are both buying from those providers, the merger may in fact boost their bargaining power against the providers and produce lower prices. OTOH there is also a concern that the merged company will have increased leverage against consumers and in battle that is ultimately between consumers and providers, health care providers always win. I guess my overall reaction is wary but not alarmed.

Now when we see hospitals or drug manufacturers buying insurers or visa versa, then it’s time to get alarmed. Very alarmed.


$69 billion dollar deal reached.