How Consumers Could Be Affected If CVS And Aetna Merge NPR's Kelly McEvers talks with Amanda Starc, associate professor of strategy at Northwestern's Kellogg School of Management, about the implications of a potential CVS and Aetna merger. She says that consumers will probably not see a reduction in their prescription drug prices, if the deal goes through.
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How Consumers Could Be Affected If CVS And Aetna Merge

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How Consumers Could Be Affected If CVS And Aetna Merge

How Consumers Could Be Affected If CVS And Aetna Merge

How Consumers Could Be Affected If CVS And Aetna Merge

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NPR's Kelly McEvers talks with Amanda Starc, associate professor of strategy at Northwestern's Kellogg School of Management, about the implications of a potential CVS and Aetna merger. She says that consumers will probably not see a reduction in their prescription drug prices, if the deal goes through.

KELLY MCEVERS, HOST:

The drugstore chain CVS Health is reportedly trying to buy Aetna, one of the nation's largest health insurers. They're still in talks, but if the deal goes through, it would be one of the largest corporate acquisitions in the history of the health care industry. Here to talk more about this is Amanda Starc. She teaches health care strategy at the Kellogg School of Management at Northwestern University and joins us from Evanston, Ill. Hi there.

AMANDA STARC: Thanks for having me.

MCEVERS: So most of us know CVS as, you know, the drugstore on the corner, right? Why are they interested in buying this big health insurance company?

STARC: It turns out that your perception of CVS as the drugstore on the corner isn't quite right. So in practice, CVS provides a lot of drug insurance through something called a pharmacy benefits manager. And that's going to account actually for the majority of their revenue. So while you might think of them as the drugstore, they're ultimately a big insurance company.

MCEVERS: So what would a merger like this then mean for CVS and then also just for customers?

STARC: So ultimately this is going to push CVS even more into being an insurance company rather than a retail pharmacy. It will allow them to have a large, captive audience for that insurance arm, and that might allow them to do a couple of things. They might be able to negotiate lower drug prices from manufacturers by virtue of their sheer size. They might also be able to better align your pharmacy benefits and your health care benefits, right? So we might want to provide pharmacy benefits to incentivize you to do things like fill your blood pressure pills so that you don't end up in the hospital. An integrated insurer would be able to do that.

MCEVERS: So I could, like - if I were going on the market to get health insurance, at some point I could be getting CVS health insurance. Is that what's going on here?

STARC: Absolutely. Now, it might be that part of your insurance is already provided through CVS. Large national insurers as well as Blue Cross plans will often contract with CVS to provide the pharmacy benefit. So CVS might be providing part of your health insurance whether you know it or not.

MCEVERS: So - and we hear this when companies merge, right? They talk about how they'll be able to, you know, use their status to bring prices down, right? But do you really think this would happen? Would drug prices drop for consumers if this merger went through?

STARC: So they might be able to negotiate lower prices for manufacturers. The question is whether they'll pass that savings on to consumers. Now, they'll be a large insurer, and they'll have a lot of market power. And so I, for one, am a little skeptical that that will translate into lower prices for consumers.

MCEVERS: Right, and instead will transfer into profits for the company.

STARC: Exactly.

MCEVERS: Is this the future of the health care and pharmacy industry - that they merge like this is? Is that - or have we seen examples in the past of attempts like this that haven't worked?

STARC: So we've seen lots of attempts at this type of integration in the past, some more successful than others. I think the fact that CVS has already integrated their retail pharmacy arm with this payer arm means that they're more likely to be successful than some of the other examples we've seen in the past. Whether or not this becomes the broad wave of the future I think remains to be seen.

MCEVERS: That's Amanda Starc, associate professor of strategy at the Kellogg School of Management. Thanks again.

STARC: Thanks for having me.

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