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Consumer Confidential: Less choice, higher prices feared in CVS's takeover of health insurer Aetna

David Lazarus, Los Angeles Times on

Published in Business News

CVS Health says that its planned $69 billion takeover of insurance giant Aetna would be good for consumers. That, of course, is unlikely.

For the deal to benefit consumers, it would have to result in lower drug prices or lower insurance costs. If past experience is anything to go by, this won't happen.

"You don't need a crystal ball to predict the future here," said David Balto, a health care advocate and former policy director for the Federal Trade Commission.

Such deals "have a dismal history," he told me. "They lead to less consumer choice and more exclusionary conduct. Consumers suffer by paying more and getting less choice for the vital drugs they need."

We've seen drugstores merge with drugstores, and insurance companies with insurance companies, but this is the first time a drugstore is taking over a health insurer.

Adding another wrinkle, CVS also runs CVS Caremark, a prescription benefit manager that negotiates on behalf of insurers and employers in securing the lowest possible drug prices from manufacturers and retailers.

 

If it sounds like all these health care enterprises are pulling in different directions, you're right.

Aetna wants to save a buck for its policyholders by driving drug prices down. CVS Caremark wants to help them do that by obtaining rebates from manufacturers, but it wants a portion of those rebates for itself.

Pharmacy operator CVS, meanwhile, wants to sell as many drugs as possible at the highest possible price.

Stir all that together and you get a goulash of conflicting goals and incentives, none of which seem destined to benefit patients.

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