CVS Health is going to need a few more dimes than the guys in Blazing Saddles. Why? Because CVS agreed to buy Aetna insurance for $77B. Apparently CVS wants to win the contest for the longest press release title ever: “CVS Health to Acquire Aetna; Combination to Provide Consumers with a Better Experience, Reduced Costs and Improved Access to Health Care Experts in Homes and Communities Across the Country.” Why the merger? According to a Reuters article, “Expanding the (CVS) clinics could eventually save the combined company more than $1B annually by substituting low-cost treatments in CVS stores for more expensive hospital visits.” While the impact on patients is unknown, remember CVS stopped selling tobacco products in 2014, so we’re saying there’s a chance this is a good thing.
A while back we wrote on the possibility of Amazon entering the pharmacy market. Don’t look now but, Amazon has received wholesale pharmacy licenses in at least a dozen states. Remember Amazon recently purchased Whole Foods, so now there’s a local distribution option too. As one former Amazon employee stated, “executives at pharmaceutical companies should crush all assumptions when it comes to Amazon and their ability to enter, innovate and reimagine the pharmacy business and health care.” It’s amazing the havoc Amazon can create just by showing some interest in an industry. Will Amazon “just” do mail-order, or add retail, or become a PBM, or deliver healthcare through the Echo? Not sure, but as Amazon knows, it’s better to be rich than poor and here are 25 reasons why.
The U.S. President—“Nobody knew health care could be so complicated.” *Sigh*. Sometimes it is so complicated that it is hard to even follow the money. A recent New York Times article sheds some light on how messy things can be. The premise is that some pharmacy benefit managers and insurance companies are directing patients to take brand name products when there are approved generic options. Whatchu talkin’ bout Willis? With more biosimilars coming to market to “replace” high priced biologic medications, it’s likely that patients and advocacy groups will get vocal. If you look at the top drugs in terms of volume, the word “generic” appears in most of them and you have to get down to #39 before you see Cialis. We will leave it there for another Insight City article.
CNBC reported that Amazon is continuing its march towards “world domination” by possibly entering the pharmacy market and has hired a general manager. This comes on the heels of Amazon expanding their Prime Now delivery service in Japan to include drug and cosmetic sales. Back to the auto parts discussion. In January of this year, Amazon reported it will start selling auto parts in the US and US auto part retailers lost ~5% of their market capitalization overnight. Amazon is a beast and has the logistic capabilities to sell drugs. They may not have to do it better than current mail order providers, the convenience of a one-stop-shop might be enough. Soon you might not want your kids opening the Amazon box.
Recent power plays in the prescription drug industry make J.R. Ewing’s actions seem like child’s play. If you don’t track the specialty pharmacy market, you should. This is a $100B industry that is growing rapidly. Think high-priced drugs used to treat Hep C and Cystic Fibrosis. According to the New York Times, large PBMs might be trying to force out independent specialty pharmacies. In Alabama, BCBS recently told patients that they cannot have their prescriptions filled at CVS. This is a big deal. It means patients have to sever long-standing relationships with pharmacists, especially difficult with specialty indications. This is all part of an emerging trend to narrow networks. Look it up. You will be glad you did and you’ll be smarter.