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Column: CVS-Aetna deal is about catching up to UnitedHealth

Lee Schafer, Star Tribune (Minneapolis) on

Published in Business News

MINNEAPOLIS -- Business news writers have done their best to make the CVS Health acquisition of health insurer Aetna sound like it's going to reshape health care. But at the industry's leader, UnitedHealth Group, executives have probably already finished the review of their strategic plan in light of the dramatic merger news.

Maybe they even changed a word or two.

What CVS wants to do is not reshape a multi-trillion dollar industry but just try to catch up with UnitedHealth. Of the two competitors, the one to bet on is the one that doesn't need to operate a big network of brick-and-mortar stores.

The union of Aetna and CVS, a $77 billion deal still months many away from closing if it closes at all, would bring together a venerable company that serves roughly 22 million people in its medical plans with a pharmacy business with almost 10,000 retail pharmacy locations and about 1,100 MinuteClinic walk-in clinics.

What's at least as important as the plans for Aetna members in the stores, though, is putting Aetna's health insurance operation together with the back office of CVS and its big pharmacy benefits management business, now called CVS Caremark. There is much to be gained by integrating a health insurer with a pharmacy benefit manager, both to save a lot of money on drug costs and to help members more effectively manage their own health.

Minnetonka-based UnitedHealth, of course, is a big health insurer with just such an in-house operation. Its OptumRx business is one of the three giants in this market, along with CVS and a pharmacy benefits manager called Express Scripts.

 

The people who should be looking over their strategic plan this week, maybe even starting over with a blank whiteboard, are the executives running Express Scripts.

Other than operating stores, it's just not easy to point to any potential initiative that could come out of the CVS-Aetna combination that UnitedHealth isn't already doing. UnitedHealth has its own MinuteClinic concept, too, and apparently it even now has more than a dozen of its MedExpress urgent care clinics inside Walgreens stores.

"Management describes the early results under these pilots as being a win-win for Optum and Walgreens," said analysts from Credit Suisse, in a research report from last week.

Many of the initiatives of UnitedHealth, and a major rationale for putting together CVS and Aetna, are about helping the members of health plans get a lot better at managing the kind of ailments many of them will have for the rest of their lives, like high cholesterol or elevated blood pressure.

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