When CVS Health and Aetna announced their merger on Sunday, their executives painted an image of a dawning health care utopia.
The new company, combining one of the country’s biggest pharmacies with one of its largest health insurers, will create a world where patients will get the “human touch,” they said. Fewer people will fall through the cracks, they promised, and getting high-quality, low-cost medical care will be as close as your corner drugstore.
With their merged data about people’s health and vast reach, the two companies assert that they have the opportunity to make real change in a health care landscape that nearly everyone agrees is too convoluted, inefficient and expensive.
“It’s not going to immediately shake up the world, but I think you have two behemoths — two battleships that are slow to turn — and it will at least create an environment by which information can be shared and innovation can take place,” said Nadina J. Rosier, the health and group benefits pharmacy practice leader at the consulting firm Willis Towers Watson.
Whether this rosy future will become reality, however, is far from certain. The announcement of the $69 billion merger set off a wave of speculation over just how much it will upend the way people get medical care in this country. And few expect drug costs, which have been rising, to decline under this arrangement.
Skeptics say CVS and Aetna entered into the deal not to benefit consumers but to strengthen their competitive positions at a tumultuous time for the industry, in the hopes that the combination will yield new business opportunities. The two are already major health care players. If they wanted to change the world, critics asked, why haven’t they done so already? Others pointed out that a major rival, UnitedHealth Group, already owned a large pharmacy benefit manager, OptumRx, yet drug prices have continued to rise, and consumers remain frustrated.
Some worry that the nation’s health care system will come to resemble a series of kingdoms, where consumers are locked into separate ecosystems of pharmacies, doctors and health care clinics depending on their insurance provider.
Given that many people change insurance plans frequently, “you may be bounced from kingdom to kingdom,” said B. Douglas Hoey, the chief executive of the National Community Pharmacists Association, the trade group for independent pharmacists.
The deal, which still needs approval by the two companies’ shareholders as well as regulators, would create community-based hubs at the roughly 10,000 stores that CVS now operates, where consumers would be able to get some array of care. By overseeing patients’ medical benefits as well as their pharmacy benefits, the companies hope to better coordinate treatments for customers.
Instead of getting lost in what Aetna’s chief executive, Mark T. Bertolini, describes as the “rat maze” of health care, patients could go somewhere near their home to have a chronic condition like diabetes followed by a nurse or to a clinic to check out if a sore throat is strep.
While the traditional health care system could be overseeing people’s care, it isn’t, said Larry J. Merlo, the chief executive of CVS, who described the merger as a way of capitalizing on “the opportunity to meet a huge unmet need.”
“You have a really good strategy,” said Brian Tanquilut, a health care equity analyst for Jefferies. Aetna and CVS “really want to transform the way care is delivered,” he said, but “unless you can really execute well, a good strategic goal and vision will not automatically translate into better health care and reduced costs.”
The prospect of significant cuts to government programs like Medicare due to the Republicans’ proposed tax overhaul, as well as uncertainty over the future of the Affordable Care Act, is forcing many hospital groups and health companies to rethink their business plans and potential partners.
The possibility that retailers like Amazon will enter the pharmacy business and that technology companies will offer medical care via cellphone is a threat that the established players see the need to combine to combat.
“It’s an industry highly in flux,” said Benjamin Gomes-Casseres, a professor at Brandeis International Business School. “What we have here is a remixing of assets.”
While the deal between Aetna and CVS is a vertical merger that blurs different health care businesses, others are still looking to get larger within the same field. On Monday, Advocate Health Care, a large Chicago system of hospitals and doctors that failed in its attempt to merge with another Chicago-area group this year, said it planned to combine instead with Aurora Health Care, a Wisconsin system. The deal could make it one of the nation’s largest nonprofit systems.
Analysts and others said one of CVS’s biggest obstacles, requiring significant investment and time, would be to transform its drugstores into a broader medical setting.
“It’s going to face many hurdles,” said Adam J. Fein, president of Pembroke Consulting, who researches the drug-distribution industry. He said changing people’s minds about what happened inside a CVS — and persuading them to seek out medical services there beyond getting a flu shot — could be difficult. And some have raised questions about whether the care will be disjointed and low quality.
“I wouldn’t underestimate the barriers that existing providers” will throw in the way, Mr. Fein said. He noted that in recent years hospitals had been competing in the same area, setting up urgent-care clinics and more closely coordinating with primary-care doctors.
CVS was unable to develop this new model with its existing stores, said Martin Gaynor, a health economist at Carnegie Mellon University, who noted retail clinics had not yet shown they saved money over all, even if people found it easier to get care. “What are they going to do different here?” he asked.
If the idea succeeds, the transformation could give patients more options and better convenience. Patients would also benefit if the new company got better at coordinating care, such as improving the transition from the hospital to home, or managing chronic conditions like diabetes.
Employers could use the merger to their advantage, said David Dross, a pharmacy benefits expert for the consultant Mercer. With UnitedHealth owning OptumRx and CVS teamed with Aetna, employers may be in a better position to demand guarantees about overall costs, he said.
“There is the ability there to move the needle a little bit,” Mr. Dross said.
Brian Marcotte, the chief executive of the National Business Group on Health, said, “There are elements of this that could be tremendously beneficial if it’s executed on and flows through the system.” But Mr. Marcotte, whose group represents large employers that offer health benefits to their workers, is wary of claims that mergers will result in savings for employers and consumers.
“In most scenarios, I don’t think we have these synergies flow back,” he said.
While the combination could lead to much lower costs, it may not ultimately change the existing pharmacy model, Mr. Marcotte said, but could “further entrench an already entrenched business model.”
“It is too soon to tell,” he said.
Still, others said the merger could further limit options for consumers, who have already seen a steady narrowing of their choices, from which pharmacy they can visit to which doctor they can see.
The deal could also have a ripple effect, leading other companies to team up in an effort to compete.
The merger will leave Express Scripts as the only remaining major pharmacy benefit manager to not be tied to an insurer. The distinction could become a selling point for Express Scripts — a point its chief executive, Timothy C. Wentworth, made in an interview with CNBC last week.
“Right now I love where we sit,” he said. “As an independent company, we don’t have stores to feed. We don’t have health plans to feed.”
But others noted that Express Scripts could also decide to merge with a health insurer — such as Humana or Cigna — or combine with a retail chain like Walgreens.
David Mitchell, the founder of Patients for Affordable Drugs, a nonprofit that does not take money from the insurance or drug industries, said he was skeptical that consumers would see much benefit. He noted that CVS Health and Aetna were already industry behemoths that had had ample opportunity to improve conditions for patients.
“They’re not doing this to provide better care to people,” he said. “They’re doing this to make more money.”