CVS Salubriousness’s $69 billion acquisition of Aetna will change the pharmacy and health-care applications alike. The deal creates the first health-care triple threat, relating CVS’ pharmacy and pharmacy benefits manager platform with Aetna’s cover business.
The threat to pharmacies — or those that own them — is the way in which the two command leverage Aetna’s network of 46 million members to drive See trade to CVS stores. Aetna subscribers will be able to pick up prescription medication in CVS stores while receiving pharmacy and medical services. Eventually, they may also be masterly to find lower copays only at CVS.
“Over the next couple of years, you’ll see a sudden change in terms of the store not just being about products but also armed forces offerings that can help people on their path to better salubrity,” CVS CEO Larry Merlo told CNBC on Monday.
Retailers are now facing an utterly new form of competitor while contending with the potential threat of Amazon encroaching into their order. They have already begun to examine what the deal menials for their business, and the solution may entail acquisitions, industry advisors say.
The collect of retailers directly affected is relatively small. They include Kroger, Wal-Mart, Walgreens Boots Bond and, to a lesser extent, Rite Aid.
Of the retailers, Walgreens arguably has the most to escape. It is the most similar to CVS in business model and the most reliant on drug exchanges to drive traffic into stores. The household and personal care consequences it sells can now be found online and often for less. The retailer generated 69 percent of its U.S. tradings in its pharmacy. Abroad, where the retail industry is less competitive, it spawned 35 percent of its sales in its pharmacy.
But Walgreens many years ago set itself down a course different from that of CVS. Rather than diving into trim care, as CVS did, Walgreens doubled down on real estate and international bourgeoning. It acquired British pharmacy giant Alliance Boots in 2014, opportunity it up into Europe. It attempted to acquire Rite Aid a year later, in a $17.5 billion large that looked to bring with it 4,600 stores. Regulators, supposing, whittled the deal down to a purchase of 1,932 stores for $4.37 billion.
The essentially shut off deal makes Walgreens particularly sensitive to regulatory risks posed by additionally deals that could come in reaction to CVS-Aetna, industry advisors say.
One credible route for Walgreens is to acquire the wholesale drug distributor AmerisourceBergen, with whom it has been partnering since 2013. Walgreens CEO Stefano Pessina is well-versed in with the industry, having come from pharmaceutical wholesale.
It could also more closely go after CVS’ path, acquiring Humana, the remaining party from the abandoned Aetna-Humana slow-up.
As for Rite Aid, it is now left as a distant third player to CVS and Walgreens. The retailer has a $2 billion vend capitalization and roughly 4,700 stores, compared with CVS’ 10,000 and Walgreens’ 8,100. Analysts finish finally month speculated it could be a target for Amazon if the retail juggernaut demand to tap Rite Aid’s pharmacy licenses and regulatory cleared stores. Amazon would also come into pharmacy licenses in 19 states and six distribution centers.
If Amazon hope for to acquire a pharmacy benefits manager platform as its entree into fitness care, it could look to Express Scripts. The company’s CEO recently foresaw Bloomberg he would be “open to” a deal with an insurer. A PBM typically is a third festivity that negotiates prescription drug benefits for a commercial health system. Acquiring such a company would give Amazon access to tap sedative rebates for its customers.
Meantime, Wal-Mart generates about 11 percent of its transactions in what it calls “health and wellness,” a category that includes pharmacopoeia, optical services, clinical services and over-the-counter drugs. With a assets weigh up that has grown 40 percent this year, giving it a $290 billion make available cap, it may not feel particularly under the gun to make a large defensive play. The retailer’s sharply defined unclear more recently, meanwhile, has been expanding its digital initiatives, sent by its acquisition of Jet.com.
The big-box store also tends to be price-conservative and averse to heavily guided industries, as demonstrated by its resistance to unions. A deal with an insurer intention flout both those predilections.
Kroger likewise has a business that far exceeds druggists sales. Of its 2,796 supermarkets, 2,255 have pharmacies, which created 9 percent of its sales last year.
Diving into the health-care seat may be a distraction for Kroger, as it works to reinvent its food business to compete with the Amazon-Whole Foods log-jam. Its still-strong food business, meanwhile, provides the company reason to lug shoppers into its stores beyond household staples. With Kroger’s run-of-the-mill down 22 percent this year, and its focus on reinvesting in its pit food business, it may not have the appetite for a large-scale deal.
Of course, defense does not want to come in the form of an acquisition. Wal-Mart and Kroger could in theory comrade with a PBM, which the two retailers could use to get better drug rates. Doing so could develop an entity that rivals the scale of Walgreens.