
CVS Is Said to Agree to Buy Aetna - jdpedrie
https://www.nytimes.com/2017/12/03/business/dealbook/cvs-is-said-to-agree-to-buy-aetna-reshaping-health-care-industry.html
======
allenz
I see this as a move towards providing cheap basic medical care. This is
timely now that it's possible that the individual mandate will be repealed.
Millions of uninsured people could be treated for rashes or flus by nurses at
CVS cheaper and faster than at doctor's offices.

More competition in healthcare could be a good thing--many say it's bloated
and overpriced. The risk is that poor people get basic care while rich people
get full care, widening health disparities.

It's unclear what the new healthcare economics will look like. Currently,
minor procedures are profit centers for doctor's offices and hospitals. They
subsidize complicated patients (often elderly with multiple chronic diseases
like diabetes or COPD) who are riskier and take more time to treat. If CVS is
taking that money, then hospitals may need to do some cost-cutting.

~~~
jrnichols
> treated for rashes or flus by nurses

I sometimes think that's one of the things that's kept health care so
expensive. Nursing salaries aren't cheap. A lot of the home health and basic
clinic stuff could be handled by an LPN/LVN or even a Paramedic in many cases.
Not everything needs an RN. There are plenty of available telemedicine options
to put a provider in touch with a higher level of care if necessary.

~~~
just1nn
"Professional Extenders" are everywhere, and it hasn't caused anything to
become cheaper. If you show up at an urgent care, just expect that you will be
treated by a LPN and a PA or a NP. A Family Practice physician's salary is
about comparable to a Sr. Engineer at many tech companies (~160k), and they
can have significant malpractice insurance overhead and insane hours. A PA or
NP still makes 6 figures, so the "savings" just aren't there.

If you've ever had to attend something like Physical Therapy, you'll see the
actual PT (a MS/Doctorate level professional aka DPT) about twice. Once for an
eval, and once for a discharge. An "aide" will guide you through all the other
exercises, and they make very significantly less than a PT.

The savings are mysteriously gone, even adding lower-salaried professional
extenders.

~~~
psergeant
> “Professional Extenders" are everywhere, and it hasn't caused anything to
> become cheaper.

This needs the caveat of “to American consumers”. The NHS seem to be heavily
moving in that direction, and I suspect “cheaper” is no small part of that

------
rdl
If this turns every CVS into a uniform, inexpensive office/urgent care/etc.,
particularly with telemedicine, I'll be happy -- the "minute clinic" stuff
already provides cheaper and more convenient access to care, but
CVS+Aetna+some kind of EHR could do something amazing.

~~~
maxerickson
Given that currently around 1 out of 9 locations has a minute clinic that
seems unlikely.

[https://cvshealth.com/about/facts-and-company-
information](https://cvshealth.com/about/facts-and-company-information)

When I had Aetna, they didn't even cover getting a flu shot at the pharmacy.
Maybe they changed that, but it's dumb, they covered it 100% using primary
care.

~~~
dr_
I can attest to the fact that Aetna does cover flu shots now.

~~~
quadrangle
Flu shots are _required_ to be covered in _all_ U.S. insurance per the ACA.
The point was that Aetna was requiring the more expensive (for them!) visit to
a doctor's office for them to cover it and wouldn't cover it happening at a
pharmacy.

~~~
Consultant32452
The ACA states that your insurance provider must spend 80% of their premiums
on health care. The doctor is more expensive, so the health insurance provider
is allowed to keep more nominal dollars.

~~~
refurb
Although true, I doubt that's the reason since stuff like this was common pre-
ACA.

The truth is that everything that a payer pays for is done through contracts.
Payers will often default to a specific provider because the contract covers
it and they don't have a contract for other providers.

In terms of the cost, back-end rebates often bring it down. Also, this
particular contract may cost more for a flu shot, but save them even more for
other procedures.

------
IBM
A big chunk of the health care industry is the oligopoly of distributors.
There's only 3 of them: McKesson, AmerisourceBergen and Cardinal. If Amazon
can bring much needed competition to that part of the healthcare market it'd
help bring prices down. CVS is moving up the stack because they're afraid of
Amazon entering the industry. They're combining a retailer, PBM and now a
health insurer. Personally I think it should be blocked because the last thing
the health care industry needs is more concentration, but it will likely pass
because of the nonsense (Bork-created) antitrust regime of the past 40 years.

~~~
conanbatt
IF you want to disrupt the pharma market, just let drug importation go free,
and instead of debating the effects of a one new player, see the effects of
the entire world getting in on it.

~~~
chimeracoder
> IF you want to disrupt the pharma market, just let drug importation go free,

Yup. Allowing reimports of prescription drugs would be the single easiest way
to have a massive effect on the costs of care in the US, with pretty much no
negative impact on patients, providers, _or_ pharmaceutical companies in the
US.

~~~
Flammy
How would that not significantly harm the pharmaceutical companies? Don't they
make a decent percentage of their revenue off of brands which are currently
price protected via these tariffs?

~~~
chimeracoder
> How would that not significantly harm the pharmaceutical companies? Don't
> they make a decent percentage of their revenue off of brands which are
> currently price protected via these tariffs?

As lostapathy explained below, US prices are currently high because that's
where pharmaceutical companies are capturing their profits. In fact, even
European pharmaceutical companies make most of their revenue from sales in the
US, not Europe. (This is why the US funds over 50% of R&D for _the entire
world_ , even though it only has 300 million people, and many of the largest
pharmaceutical companies are based in Europe, not the US).

If reimportation were permitted[0], pharmaceutical companies would adjust the
prices of drugs across those countries, which would bring drug prices in the
US and Europe in line with one another.

Ultimately, pharmaceutical companies would still be able to make the same
amount of money off the drugs, but it would distribute the _sources_ of that
money more evenly across the people who are actually using the drugs (and
benefiting from the research and development).

[0] it would almost certainly only apply to reimports of drugs from other NATO
countries (more or less), because those are the countries that abide by US
patent law on drugs (India and China, by contrast, do not recognize US patent
law on large classes of drugs),

~~~
ropeladder
"the US funds over 50% of R&D for the entire world"

Not sure exactly what numbers you're basing that on, but I believe a
significant portion of that research (especially basic level stuff) is
government funded, which is not a good argument for allowing pharma companies
to keep prices high.

~~~
chimeracoder
> Not sure exactly what numbers you're basing that on, but I believe a
> significant portion of that research (especially basic level stuff) is
> government funded, which is not a good argument for allowing pharma
> companies to keep prices high.

Nope, government funding is tracked separately.

------
ropeladder
The only real upside I see here is that, the more vertically and horizontally
concentrated the private sector gets, the more absurd most arguments for
privatized, profit-driven healthcare appear.

Basically every other developed country has shown that the government can do
as good of a job at half the cost. Socialize it all.

~~~
throwaway13337
I agree in spirit but I'd also point out that our public spending on health
care is already at about the same costs as western counties with socialized
medicine. [1]

Our tax dollars are already paying out as much as other countries do but their
citizens get a lot more for their money.

The solution to lowering the cost of medicine in the US has not a single
solution but lies at every level of the system.

[1] [https://www.oecd.org/health/health-systems/Focus-Health-
Spen...](https://www.oecd.org/health/health-systems/Focus-Health-
Spending-2015.pdf) \- it's the second chart.

~~~
peg_leg
Much of what we pay goes to Profit on several levels - insurance, provider,
and medications, et al. That's where the American waste is.

------
gigatexal
Um wtf. This is akin to comcast buying NBC. This is not good.

~~~
phkahler
Thank you, the top comment and all its follow-up seem to think it's a good
thing and may lower cost. It's hard for me to imagine this being anything less
than a way to make _more_ money with the combined companies.

~~~
sithadmin
Of course it's a way to make more money. They wouldn't move forward with this
deal if it wasn't. But this doesn't preclude the possibility that end result
will be a more efficient, vertically integrated healthcare provider.

------
drawkbox
It is a consolidation but CVS is a consumer focused company, which is
something the US Healthcare system needs more of direly.

Part of the problem with health insurance tied to a job in the US is the fixed
market that is shrouded from consumers leading to horrible pricing and
service. Employment handling healthcare, in addition to a fixed pricing
market, also harms the individual market due to horrible grouping, invades
privacy, makes it harder to change jobs or start a company, and on top of that
fuels ageism as costs go up with age in health. Employers should have no part
in your healthcare, pay people more to go get it is all that should be
allowed.

All other insurance types are consumer focused for auto, life, home and more.
CVS taking over Aetna could be a great force in the market to make other
companies get competitive on the consumer front. Aetna and BCBS are two of the
worse non consumer friendly insurers around, they really hate dealing with
individuals and small companies.

------
LeoJiWoo
Well I hope this a good thing, and won't lead to price gouging.

The trend of corporate consolidation is concerning, we need more monopoly
busting, and anti-trust investigations.

~~~
cdolan
I agree the trend is concerning, but what data are you basing the “need” for
monopoly busting and anti trust investigations off of??

~~~
whatshisface
It sounds like he's thinking about all the times this has happened in the
past.

------
bartart
Does this mean that many CVSs will become magnets for sick people as CVS tries
to integrate more basic health services into its stores?

I realize that most people going to an expanded minute clinic aren't going to
be some sort of walking dead, but it seems that if CVS tries to make its
stores too much like primary care with ill people going to get prescriptions
from a doctor, then people will avoid buying things at its stores to avoid
getting sick.

~~~
pcurve
Minute clinic facility usually has physical separation from CVS store, no?

~~~
dangrossman
The one I've seen was just an extra room inside the store, beside the
pharmacy. There was no physical separation of patients from shoppers. Same
thing at Walgreens Healthcare Clinic, just extra rooms beside the pharmacy.

------
ikeboy
>Both CVS and Aetna played down the prospects of regulators moving to block
their deal. The breakup fee for the transaction is not especially large,
reflecting that belief.

What's the causality here? Why does a lower chance of being blocked imply a
lower fee if blocked?

~~~
erebus_rex
Takeovers cost time and money to execute (lawyers, consultants, bank fees)
beyond just the purchases price. If the deal does not go through it is a loss
for the acquirer, hence breakup fees. If the chance of takeover failure is low
the acquirer will be willing to accept a smaller insurance.

~~~
ikeboy
The fee is only paid if it doesn't go through. So I still fail to see how that
reflects the chance of success.

------
ahh
I wonder if this will lead to restrictions on the use of copay coupons [1].
Insurers hate them since they break my incentive to use cheaper drugs from
their formulary, but pharmacies don't care (and probably are better off for me
using them.)

Since I mostly hate my insurer and want to help them towards bankruptcy by
extracting as much coverage from my fixed premium as possible, I have no
objection to using these coupons if they'd help me and I felt like an
expensive drug choice was better for me, though it's not come up for almost
any drug I've needed.

Though I do need new epi-pens; maybe I should look for one while I still can!

[1] [https://www.propublica.org/article/are-copay-coupons-
actuall...](https://www.propublica.org/article/are-copay-coupons-actually-
making-drugs-more-expensive)

~~~
Broken_Hippo
That highly depends on your prescription insurance coverage and how much they
have to pay compared to the generic.

For example, some simply won't cover the brand name if the generic works for
you. Others will let you get the brand name, but will only cover the amount
they would pay for the generic. In either of these situations, the coupon
wouldn't matter to the insurance company.

With other plans, though, the insurer pays more with the coupon. And if yours
does, you can "stick it to the man" using coupons.

------
anilshanbhag
Many are questioning if this move will help consumers. I think it will. Aetna
is the __third __largest insurer and CVS is soon to be __second __largest
pharmacy chain. Pharmacies provide basic care at lower cost, many insurance
companies are moving Prescription Benefit Managers (PBMs) in-house to lower
cost. By combining the two: CVS is able to get more customers for PBM due to
Aetna and distribute the cost over a larger base of patients, Aetna maybe be
able to reduce costs per customer and better compete with larger insurance
firms - its a win-win and a win for consumers.

~~~
aaavl2821
Historically consolidation of any kind in healthcare (hospitals, payers) tends
to increase costs to consumers

This merger may create value but I'm sure Aetna / CVs will capture as much as
possible themselves and consumers will see little of it

------
SockPuppeteer
They should break up the big insurance companies and not consolidate each
point of sale area for more profit.

Ex: A knee brace went over the $500 requirement to have a prior approval
before issuance. No one knew this at the time so the doctor gave a cost price
of $100 for the brace to avoid phone calls, letters, and time.

Can we please eliminate medical bills if not sent to the patient within 90
days? 2-5 years late is just pathetic.

------
almostApatriot1
I wonder how much this has to do with the strong push for Online Pharmacies
over the past decade. I hate using them, but my deductible costs next year
have increased so much that I will have no choice.

------
m3kw9
I see CVS using this to defend Amazon by giving Aetna customers with store
discounts

------
exabrial
Reminds me of the quote "There is no way to do CVS correctly..."

------
cjhanks
When will SVN buy Cigna?

------
rsync
I feel that perhaps healthcare is the ultimate triumph of capitalism.

Every other avenue of runaway consumerism and overconsumption can obviously be
pointed to as either indulgent or unnecessary.

But not healthcare: it's your health, after all - your wellbeing. It's a
fundamental right, right ?

...

The received wisdom is that the aging of the baby boomer generation is driving
expanded healthcare expenses as this large sect gets older. It's _obvious_
that they need all of this "healthcare".

But what if there were an alternative, more insidious explanation:

The boomers represent an irresistible pile of money. But they don't smoke.
They don't have new households to start. They're getting wise to the whole
sugar thing. What is left to tempt them with ?

What if there were a clear imperative on the part of a variety of industries
to keep this population as unhealthy as possible - so they can stripmine their
assets for "healthcare" ?

~~~
throwaway0255
> The boomers represent an irresistible pile of money. But they don't smoke.
> They don't have new households to start. They're getting wise to the whole
> sugar thing. What is left to tempt them with ?

> What if there were a clear imperative on the part of a variety of industries
> to keep this population as unhealthy as possible - so they can stripmine
> their assets for "healthcare" ?

It's not clear that living a healthy lifestyle reduces healthcare costs, it
can actually make you more expensive to care for.[1][2][3]

Diabetes medications and death from sudden heart attacks are cheap. Healthy
people who live into their 80s/90s are the biggest drag on the healthcare
system. They spend more of their lives as retirees. They end up needing
24-hour care. And then they still incur the same end-of-life causes as the
obese/smokers... they get cancer, they get heart disease, alzheimers, etc.

Smokers and obese are inexpensive to care for in terms of lifetime cost. The
best-case scenario for an insurance company is that you get hit by a bus or
something. Barring that, I think they might actually prefer that you be a
smoker or become obese.

[1] [http://www.telegraph.co.uk/news/health/news/9359212/Obese-
an...](http://www.telegraph.co.uk/news/health/news/9359212/Obese-and-smokers-
less-of-a-burden-on-the-NHS-than-the-healthy-who-live-longer-report.html)

[2] [http://www.nytimes.com/2008/02/05/health/05iht-
obese.1.97488...](http://www.nytimes.com/2008/02/05/health/05iht-
obese.1.9748884.html)

[3]
[https://www.forbes.com/sites/timworstall/2012/03/22/alcohol-...](https://www.forbes.com/sites/timworstall/2012/03/22/alcohol-
obesity-and-smoking-do-not-cost-health-care-systems-money/#647df5ab64aa)

~~~
leekyle333
More money is spent on diabetes than any other category.
[https://health.usnews.com/health-
care/articles/2016-12-28/di...](https://health.usnews.com/health-
care/articles/2016-12-28/diabetes-takes-biggest-bite-out-of-us-health-care-
spending)

~~~
throwaway0255
I'm not surprised, but eliminating those costs isn't as simple as eliminating
diabetes. If diabetes is cured tomorrow, those costs don't just disappear,
they get remapped to whatever other health complications and end-of-life
events those people run into instead of diabetes. Then it gets complicated
even further when you compare the impact to working years vs retiree years,
and the resulting default rates and bankruptcies.

Diabetes can represent a massive chunk of healthcare spending, and also be an
inexpensive patient outcome relative to many alternatives. Both can be true at
the same time.

------
godzillabrennus
Hopefully this helps consumers. I doubt it though.

Seems like it’s going to take Jeff Bezos to fix healthcare in America.

~~~
rhizome
Watch out for Engineer's Disease.

~~~
winslow
Could you elaborate?

~~~
ch4s3
Engineer's Disease refers to specialists in one field assuming that they can
speak with authority some other unrelated field. Healthcare in the US is
notoriously complex and complicated, it would be naive to assume Amazon's
success in distribution, ecommerce, and cloud services would necessarily
translate to health care.

~~~
sheraz
True, but there is a lot of low hanging fruit in the digital health space that
amazon is especially efficient at.

~~~
aaavl2821
People have been pursuing "low hanging fruit in the digital health space" for
the last 5 years with little to show for it. Most successful (as measured by
acquisitions / adoption in the broader industry, not by VC funding raised)
health IT startups come from "flyover" states and are created by people with
tons of domain expertise and enough engineering chops to execute, not the
other way around

------
ulfw
The monopolisation of American industry continues.

------
patrickaljord
Most HN users who don't live in the US probably don't know what CVS is or
care.

~~~
cdelsolar
HN is based in the US.

------
Something1234
All I can say is fuck Aetna. Worst insurance ever, maybe this will make them
not be shit. Good luck getting your promised benefits out of them and making
it work for you. Every single time I've called them, I get put on hold for 20
minutes, before getting someone who can barely speak English, and the worst
part is that their call center is in America.

~~~
perseusprime11
So much for the mindfulness of their ceo:
[https://www.fiercehealthcare.com/payer/how-aetna-s-
bertolini...](https://www.fiercehealthcare.com/payer/how-aetna-s-bertolini-
embraces-mindfulness-to-improve-company-culture)

