Amazon's entrance into healthcare, and UnitedHealth Group's continued success in the field, led to CVS Health and Express Scripts tying knots with two of the largest U.S. health insurers: Aetna and Cigna, according to an op-ed in Bloomberg.
In the opinion piece, Bloomberg Gadfly columnist Max Nisen writes how 70-plus percent of all U.S. prescriptions are processed by CVS, Express Scripts or UnitedHealth. Following proposed Cigna-Express Scripts and CVS-Aetna tie-ups, three companies — including UnitedHealth and its own pharmacy benefit manager — will cover 90 million-plus Americans, process more than 3.5 billion prescriptions and achieve $500 billion-plus in revenue.
With UnitedHealth's ever-growing presence aside, Mr. Nisen sees Amazon as the other catalyst of this huge consolidation.
"The mere threat of the online giant getting into the health business prompted the country's two largest pharmacy benefit managers — CVS Health Corp. and Express Scripts Holding Co. — to join forces with two of its largest insurers, Aetna Inc. and Cigna Corp.," he writes. "These deals will put more U.S. healthcare under the control of fewer companies. The merging companies say this will lower costs for consumers and the country. But the reality will likely be less rosy and more complicated."
That's not to understate UnitedHealth's role in changing healthcare, Mr. Nisen notes. UnitedHealth has consistently led its competitors in enrollment, market valuation and revenue growth. Its own diversification and purchase of a PBM in 2015 "has inspired copycats," Mr. Nisen argues, while increasing profit pressure on PBMs has made them more likely to agree to insurer mergers.
"But Amazon's long shadow also helped instigate these deals," he writes. "With its technological prowess, long investment horizon, bottomless appetite for new business and tolerance for thin margins, any mention of its interest in healthcare rattles investors, particularly in the industry's middlemen."
Mr. Nisen predicts mega-mergers involving insurers may not be over as players like Anthem, Humana and Walgreens Boots Alliance watch their peers.
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