Drugstore giant CVS Health agreed to buy Aetna for $69 billion. The rationale behind the merger is to bring pharmacy benefit management or PBM and insurance under the same roof. The strategy of combining those two together was proven to be efficient by UnitedHealth Group that bought Catamaran in 2015 to bulk up its PBM business and increased its revenue significantly since. Besides, healthcare companies are trying to bulk up before Amazon’s becomes a substantial threat after obtaining wholesale pharmacy licenses in at least a dozen states. However, it is not clear whether the e-commerce giant is planning a move into the prescription drug delivery business, territory currently dominated by a very few companies. The merger will reshape the CVS business by allowing it to use its chain’s walk-in clinics to deliver care for patients. In addition, last week, Anthem declared that their contract with Express Scripts Holding expires in two years and after that it would start its own in-house PBM.
The deal of $69 billion would out CVS in a big risk given it already has $25 billion in net debt as of end of June. However, this acquisition might lead to significant synergies that might justify the risk.