CVS Is Said to Be in Talks to Buy Aetna in Landmark Acquisition

In addition to its pharmacies, where it runs walk-in clinics, CVS is one of the nation’s top three pharmacy benefit managers. CreditChristian Hansen for The New York Times

CVS Health, the giant drugstore chain that also runs walk-in clinics and a pharmacy benefit business, is in talks to buy Aetna, one of the nation’s largest health insurance companies, according to people briefed on the talks.

Negotiations between the two companies could still fall apart, these people say. But if consummated, the deal could be worth more than $60 billion based on Aetna’s current market value, which would make it one of the largest corporate acquisitions this year and one of the largest in the history of the health industry.

The proposed combination reflects the blurring of traditional boundaries in health care, as established companies seek to find their footing in a rapidly changing environment. Congress is deadlocked over the future of the Affordable Care Act, and employers and consumers are struggling to contain rising medical costs, particularly skyrocketing drug prices.

“I think this deal has been a long time coming,” said Adam J. Fein, president of Pembroke Consulting, a management advisory and business research company. “CVS has been positioning itself as a health care company and not a pharmacy for a long time.”

The negotiations are also taking place as the online retail giant Amazon encroaches on the turf of well-established players — and the pharmacy business could be next. In industries ranging from book sales to groceries to television programming, Amazon has displaced stalwarts that had enjoyed decades of limited competition and rarely interrupted growth.

The talks between CVS and Aetna appear to be in part an attempt to fend off a move by Amazon into the drug-selling business — or at least to insulate the companies in case Amazon does invade. Signs are emerging that Amazon has designs on the pharmacy industry, with The St. Louis Post-Dispatch reporting on Thursday that Amazon had gained licenses in 12 states to become a wholesale prescription drug distributor.

A larger company — CVS and Aetna have combined annual revenues of about $240 billion — could enjoy greater leverage in negotiations with drug companies, helping it defend itself against newcomers like Amazon.

“The intensifying battle for negotiating power and market share will lead companies to do acquisitions across traditional industry boundary lines,” said Erik Gordon, a professor at the Ross School of Business at the University of Michigan who studies the drug industry. “Pharmacies, drug wholesalers and benefit managers are trembling at the prospect of competing with Amazon.”

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Mark Bertolini, the chief executive of Aetna, which previously attempted a $37 billion merger with Humana, another large insurer. CreditSasha Maslov for The New York Times

Representatives for CVS and Aetna declined to comment. News of the possible transaction, first reported by The Wall Street Journal, sent Aetna shares soaring nearly 12 percent Thursday, while CVS’s stock dropped 3 percent.

CVS, which reported revenue of $177.5 billion for 2016, is based in Rhode Island and opened its first store in 1963. It became a billion-dollar company in 1985.

Although it is best known for its chain of storefront pharmacies, it is also one of the nation’s top three pharmacy benefit managers and operates one of the country’s biggest specialty pharmacies, which sells high-priced drugs that often require special handling. The company also runs walk-in MinuteClinics in its pharmacies and Target stores around the country.

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CVS has managed Aetna’s pharmacy benefits since 2010, and it announced a deal last week with Anthem, a large insurer, to help it start the insurer’s own pharmacy benefit business. It is unclear how the Aetna deal would affect CVS’s future relationship with Anthem, and an Anthem spokeswoman declined to comment.

Mr. Fein said the acquisition of Aetna, if it went through, would mark an industry shift toward a more seamless approach to managing health care costs. Right now, insurers are typically responsible for managing a patient’s medical bills and outsource the coverage of prescription drugs to a pharmacy benefit manager like CVS. Mr. Fein said that because the fastest-growing part of the pharmacy industry was high-priced specialty drugs for people who have considerable medical needs, “it makes sense to manage those within one coordinated organization.”

“It’s a strategic play,” agreed Paul Keckley, a longtime industry consultant, who said CVS’s goal was not necessarily to be in the insurance business but to offer the ability to manage both medical and pharmacy costs for large employers. In addition to its insurance business, Aetna has partnerships with numerous large health systems and a sophisticated technology operation.

The resulting company could resemble UnitedHealth Group, which has a large insurance operation but also runs a leading pharmacy benefit manager, OptumRx, and related health service businesses.

The deal would end Aetna’s own ambitions to be a much bigger company. Its proposed $37 billion merger with Humana, another large insurer, was blocked by the Department of Justice and was called off this year.

“Aetna’s come out of this Humana scenario with some urgency,” Mr. Keckley said.

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