CVS-Aetna Merger and Healthcare Clinics' Future

Published on: 06 Dec, 2017

While investors were pitched the multiple benefits of the $69 billion CVS Health Corp (NYSE: CVS) - Aetna Inc (NYSE: AET) merger, the former pitched to its shareholders and the general public that this merger could transform the drugstores owned by it into some kind of local health hubs. These hubs, as per CVS, could reduce expenses linked to healthcare through the delivery of quality medical services in multiple convenient places. These could reduce the needs of many patients for undertaking an expensive journey to hospitals. It follows that the merger will boost rise of the retail health clinics. Their role in the healthcare industry is thus only slated to expand.

Similar to brick and mortar physical retailers, drugstores now face tough competition from the online sellers. The most prominent business competitor is Amazon.com, Inc. (NASDAQ: AMZN). The Internet behemoth is reputedly considering an entry to pharmaceutical selling. It is assumed that people who enter into a CVS store for their medical consultation could fill their prescriptions there itself. There could also be purchases of other ancillary items like laundry detergent and others which could be purchased online.

Both the companies, Aetna and CVS, said that the acquisition will assist CVS's approximately 9,700 pharmacies to provide services like medical exams without leaving the premises. Patients can also avail counseling on a number of chronic conditions which make up the majority of healthcare spends. One example of such a service is a diabetic patient getting the much-needed advice on medication and spending in the same place where the person purchases medical supplies. The merger will also help in sharing data. This means that released hospital patients can now enjoy a better understanding of the medications. According to companies, this will ensure that the chances of readmission will be minimized.

About 1,100 CVS locations are already designed as in-store MinuteClinics. A few provide eye care and hearing services as well. Walgreens, a competitor, also has a  similar services line in its 400 clinics. A few of these clinics are administered by local healthcare practices.

The aim of the merger is to make CVS feel not as a convenience store, but more like medical offices. This is already seen in the company's activities. The company stopped selling tobacco in 2014. This decision was taken as the sale of tobacco conflicted with its stated aim of improving the health of its customers. These stores, however, continue to sell sugary snacks and sodas. A few locations also sell alcoholic beverages.

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Danny Abramov

Email: Danny@financialbuzz.com

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