CVS plans to buy Aetna, addressing 3 core tenets of the digital age

December 8, 2017
4 min read

On Sunday, December 3rd, CVS Health announced that it had agreed to buy Aetna for approximately $69 billion in a deal that would combine the drugstore titan with one of the largest health insurers in the United States. This move has the potential to revolutionize not only the nation’s health care industry, but to transform insurance as a whole.

A keen example of Mintel’s 2018 Insurance Marketing Trend, ‘Scope Creep,’ this purchase signifies the acceleration of blurred boundaries between traditionally independent insurance carriers and customer-facing retailers/manufacturers. For both sides, this is a marriage of immense opportunity as it addresses three core tenets of the digital age:

1. Convenience

Today’s consumer expects all services, even health care delivery, to be seamless and accessible. In the US, however, the bureaucratic health care reality leaves much to be desired, leaving a significant opening for disruption. By purchasing Aetna, CVS now will be able to function as a true one-stop-shop where participating customers can receive care via a coordinated experience including health insurance, in-store clinics, and prescription fulfillment.

2. Cost Savings

In 2016, the Organization for Economic Co-operation and Development (OECD) estimated the US spent 17.2% of GDP on health care costs, the highest of any nation. As these costs create an unsustainable economic burden for US citizens, health insurers face growing social and political pressure to make care more affordable and to fix institutional inefficiencies. Beyond convenience, CVS has the opportunity to position its move into health insurance as a creative way to pass cost savings to its customers. For example, CVS will have the ability reshape how and where a majority of medical services are delivered. Rather than directing consumers to traditional, more expensive health care channels (e.g. a primary care physician), CVS can create an incentive structure, offering reduced cost options to customers who receive services in-store. Similarly, in taking on the roles and responsibilities of a health care insurer, the company will have an institutional incentive to keep prescription co-pays manageable—translating into direct customer savings.

3. Competition

Beyond the potential of convenience and cost savings CVS Health sees in the health insurance space, it is important to also consider the company’s preemptive motives—chiefly, to stay competitive with Amazon. In late October, news outlets reported that Amazon had quietly been acquiring wholesale pharmacy licenses—fueling speculation that the e-commerce juggernaut is planning an entrance into the drug delivery business. This, along with rumors of hiring pharmaceutical strategists and preliminary discussions with generic drug makers, has made the pharmacy world nervous. With a reputation for overturning many industries (books, groceries, retail shopping, and more) it is easy to see the tech giant playing a big role in the strategies and motivations of even formidable incumbent players like CVS. In its purchase of Aetna, CVS will gain an infusion of millions of Aetna members, increase its health care footprint and achieve greater bargaining power to compete against new entrants.

In the age of border-less, increasingly industry-agnostic category killers like Amazon and Alibaba, many companies will seek refuge through cross-sector collaboration and even among former adversaries. Moving forward, expect to see more unique or unusual partnerships especially within the insurance space as traditional players aim to introduce better technology, customer experience, and stave off competitors.

Caitlin Moling is the Director of Insights, Insurance for Mintel Comperemedia. She combines her deep knowledge of the complex insurance industry with consumer research, industry trends and competitive marketing intelligence to build timely and meaningful stories for Mintel’s insurance clients. As a part of her role as a thought leader for insurance, Caitlin travels throughout the US and Canada to present insurance marketing trends and insights to major industry stakeholders.

Caitlin Moling
Caitlin Moling

Caitlin Moling is Mintel Comperemedia’s Director of Insights, Insurance, focused on consumer and industry trends and competitive intelligence for insurance clients.

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