Aetna-Humana Deal Could Create PBM, Ending CVS Relationship
As the larger Aetna (AET) looks to the future following its proposed acquisition of Humana (HUM), one key area under consideration would be to bring the management of its large amount of prescription drugs in house and turn it into a money-maker for the larger health insurer.
This would mean a contract with CVS Health (CVS) might disappear after 2019.
Aetna chief executive Mark Bertolini and Humana’s top management, led by CEO Bruce Broussard, talked about the combined operations of the company with Humana retaining its brand in some ways and maintaining government operations in Louisville and potential new businesses that would be created, like a stand-alone pharmacy benefit manager.
Aetna has had a long-term contract with CVS Health, which could end in 2019. A slide presented this morning to analysts and investors said the larger company has an option to create a “high growth services company with substantive unregulated cash flow” and the nation’s fourth-largest PBM.
“This is something we have to work through over time,” Aetna chief financial officer Shawn Guertin said. “It is certainly something when we think about long-term value that gives us some optionality in the future.”
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Aetna wouldn’t be the first health insurer to go this route. UnitedHealth’s Optum Rx Corp already announced plans this spring to buy a PBM.
An Aetna PBM would process over 600 million prescriptions in 2015 and be the fourth largest PBM ‘on a standalone basis” the companies said. It would still be somewhat smaller than Express Scripts (ESRX) which processes over 1.3 billion prescriptions and the soon-to-be larger UnitedHealth Group (UNH) PBM, which will process 1 billion prescriptions as a result of its $13 billion acquisition of Catamaran (CTRX).
PBMs are the middleman between drug manufacturers and patients when it comes to purchasing prescription drugs. PBMs negotiate deals on behalf of employers or government health programs like Medicare and Medicaid, helping their clients better coordinate care and manage drug costs through buying drugs in bulk and essentially negotiating better – at times exclusive – deals for lower medicine prices.
The discussion about the future of the combined companies is the first since Aetna Friday announced plans to buy Humana for $37 billion. The deal appears to put the two insurers into the top three health plans in the U.S. with more than 33 million medical members and will increase Aetna’s Medicare Advantage membership to 4.4 million. The combination also gives the two 5.8 million enrollees in its combined Medicare prescription drug plan business.
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Source: Forbes
