As the $70 billion megamerger between CVS Health and Aetna awaits final approval from a federal judge, CVS Health CEO Larry Merlo on Monday talked about the deal, anti-competitive concerns and whether PBMs have a target on their back at the National Press Club.
1. Why merge with Aetna?
In 2010 Aetna signed a 12-year contract to outsource its pharmacy benefit to CVS Health. By now the two companies know one another well, Merlo said.
But Aetna’s book of business was attractive too, particularly its growing contracts with Medicaid and Medicare, whose roles are ballooning.
2. Will the CVS-Aetna merger hurt competition and limit choice?
Merlo didn’t exactly answer the question. He reframed it in terms of the health-related choices a person makes, from food to pharmaceuticals. That’s where CVS’ forthcoming health-hub “concept stores,” unveiled to investors in November, could provide more options for customers, all in the context of the biggest healthcare market in the world.
“This is a $3.5 trillion industry, and in a market of that size there will be many successful players,” he said. “We will be one of them.”
3. Will Aetna start pushing patients into CVS MinuteClinics instead of their doctors’ offices?
Again, Merlo didn’t tackle the question directly. He shared statistics: CVS MinuteClinics, where people can come in for basic tests and prescriptions, have seen 40 million people since they started, with half the visits on nights and weekends. Half the patients served don’t have a primary-care physician.
When a MinuteClinic opens, the nurse practitioner in charge visits the physicians in the area and asks if they are accepting patients for referral.
He views the clinics as complementing primary-care doctors. Nonetheless, he added: “I believe we can do a better job with matching the site of care with cost.”
4. Will CVS start distributing prescriptions by drone?
“We are doing some work on that, believe it or not,” Merlo said.
5. What about drug prices? Are PBMs in trouble with Congress?
“Drug pricing begins at the point of prescribing,” Merlo said.
With its prescription benefit plan Caremark, CVS is embedding each person’s prescription benefit into their electronic health records so their physician can see their out-of-pocket costs and five alternatives. It’s in about 100,000 physician offices and 40% of the time doctors are switching to a lower cost drug, with the patient saving roughly $125 per prescription, Merlo said.
He shrugged off Congress’ and the Trump administration’s scrutiny of PBMs, defending the business as driving prices down by excluding some drugs from therapeutic classes.