Executive Briefings

What the CVS-Aetna Deal Means for the Future of Health Care

When drug company chief executive Heather Bresch was hauled in front of Congress last year to defend the high price of lifesaving EpiPens, she drew skeptical lawmakers’ attention to a large poster board that blamed the skyrocketing price tag on a coterie of drug supply chain middlemen. Of EpiPen’s $608 list price, her company, Mylan, received only $274, Bresch said.

What the CVS-Aetna Deal Means for the Future of Health Care

“What the patient is paying is not ... coming back to Mylan,” Bresch said. “And when we were speaking earlier of the people, the middlemen in the system, that’s either the pharmacy benefit managers, retailers, wholesalers, insurers.”

That supply chain — rarely seen by most consumers — is the center of attention in the corporate world after CVS Health announced a $69bn deal to buy Aetna, the nation’s third-largest insurer.

Familiar as a corner drugstore, CVS Health actually makes most of its money from one of the most lucrative points along the supply chain as a pharmacy benefit manager, negotiating drug prices for health insurers and employers.

The merger, which would be one of the biggest health-care deals of all time, signals the primacy of those negotiations in the health-care system.

“This is kind of uncharted territory — a pharmacy benefit manager [PBM] buying a major national health plan. I think it’s a sign of the times,” said Michael Rea, chief executive at Rx Savings Solutions, a company that provides transparency prescription drug tools. “PBMs represented a little-known entity no one knew about not that long ago, and now they’re the controlling piece of the deal to take over a national insurer.”

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“What the patient is paying is not ... coming back to Mylan,” Bresch said. “And when we were speaking earlier of the people, the middlemen in the system, that’s either the pharmacy benefit managers, retailers, wholesalers, insurers.”

That supply chain — rarely seen by most consumers — is the center of attention in the corporate world after CVS Health announced a $69bn deal to buy Aetna, the nation’s third-largest insurer.

Familiar as a corner drugstore, CVS Health actually makes most of its money from one of the most lucrative points along the supply chain as a pharmacy benefit manager, negotiating drug prices for health insurers and employers.

The merger, which would be one of the biggest health-care deals of all time, signals the primacy of those negotiations in the health-care system.

“This is kind of uncharted territory — a pharmacy benefit manager [PBM] buying a major national health plan. I think it’s a sign of the times,” said Michael Rea, chief executive at Rx Savings Solutions, a company that provides transparency prescription drug tools. “PBMs represented a little-known entity no one knew about not that long ago, and now they’re the controlling piece of the deal to take over a national insurer.”

Read Full Article

What the CVS-Aetna Deal Means for the Future of Health Care