- CVS announced its acquisition of Aetna for $US69 billion on Sunday.
- The deal is the largest in 2017 and comes as rumours that Amazon could be entering the healthcare space circulate.
- But the acquisition has nothing to do with Amazon and is simply good for business, according to some analysts.
- Watch shares of CVS trade in real time here.
Some analysts have speculated that Amazon’s baby steps into the healthcare industry could have spurred the acquisition, but that is decidedly not the case, George Hill, an analyst at RBC, said on Monday.
Instead, the deal would be a way for CVS and Aetna to make healthcare delivery more efficient, according to Hill. “We view this deal as offensive by both companies, looking to a more vertically integrated, consumer directed, value-based care delivery future, and not a response to any threat from Amazon,” Hill said.
Amazon’s entry into the healthcare space is only speculative at this point and details are scarce. The company was approved for wholesale pharmacy licenses in at least 12 states in October and has been reportedly looking to make hires aimed at jumpstarting a pharmacy business.
Hill said that regardless of Amazon’s plans, the CVS-Aetna deal still makes sense for the two companies. Owning a pharmacy benefit manager to better negotiate prices with drugmakers could eliminate a middleman for CVS, and allow it to bring in a greater portion of the profits available on a drug’s journey to the customer.
A research note from Macquarie backed up Hill’s thinking.
“We believe the acquisition represents the next evolution in healthcare services following the commingling of retail pharmacy, PBM and drug distribution business creating further, necessary economies of scale and an overall ecosystem that will be impossible for non-healthcare entities to compete with,” Macquarie wrote. “More importantly, transition should end the misplaced talk that Amazon.com matters in this silo.”
The deal is still pending regulatory approval, which is less than certain in the face of comments about the AT&T-Time Warner deal from President Trump and the Department of Justice. Aetna’s stock is trading about 10% lower than the proposed price of the deal, evidence of investors’ uncertainty.
CVS is down 3.13% on Monday, and Aetna is up 1.65%. Amazon is down 1.14% amid a broader tech selloff.