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CVS expects deal with Aetna to close by Thanksgiving

CVS profits in Q3 decreased 5.8 percent to $2.4 billion, driven by a $64 million increase in acquisition-related transaction and integration costs.

Susan Morse, Senior Editor

The $69 billion acquisition of Aetna is expected to close prior to Thanksgiving, according to CVS Health in its third quarter earnings report Tuesday.

After the Department of Justice last month approved the merger pending Aetna's divestiture of its Medicare Part B prescription drug business, there are no remaining antitrust impediments to closing, CVS said. Aetna is divesting the business to a subsidiary of WellCare Health Plans.

CVS has state insurance department approvals from 23 states and is "well down the line with the remaining five," CVS said.

WHY THIS MATTERS

Many in the industry view the closing of the CVS and Aetna deal as having even a greater impact on healthcare as the Amazon, Berkshire Hathaway and JPMorgan Chase enterprise, according to a September poll of HIMSS Media readers. 

Respondents cited the ability of the insurance and pharmacy benefit business to act immediately, as having more domain expertise and affecting 22 million members as compared to the 1 million employees in the combined, nonprofit healthcare venture.

THE TREND

The integration of PBMs and insurers is taking place throughout the industry, most recently with the merger of Cigna and Express Scripts.

Consolidation in the PBM sector has resulted in three companies -- Express Scripts, Optum and Caremark -- gaining 75 percent of the market by scripts, according to DRG.

WHAT ELSE YOU NEED TO KNOW

CVS profits in Q3 decreased $146 million, or 5.8 percent, to $2.4 billion, driven by a $64 million increase in acquisition-related transaction and integration costs, an increase in expenses due to the investment of savings from the Tax Cuts and Jobs Act in wages and benefits, as well as an increase in operating expenses associated with growth in the business.

These increases were partially offset by improvement in the pharmacy services segment primarily due to increased claims volume. Revenues in CVS's pharmacy services segment increased 2.6 percent, to approximately $33.8 billion.

Revenues in the retail and long-term care segment increased 6.4 percent to approximately $20.9 billion, primarily due to an increase in same store prescription volume of 9.2 percent, as a result of CVS's continued adoption of its patient care programs, alliances with PBMs and health plans, inclusion in a number of additional Medicare Part D networks this year, and brand inflation. This increase was partially offset by continued reimbursement pressure.

Pharmacy same store sales increased 8.7 percent but were partially offset by recent generic introductions, CVS said.

ON THE RECORD

"While CVS and Aetna remain separate companies today, the performance of both companies highlights the very solid financial foundation on which we'll build our revolutionary new model that will transform the healthcare experience for consumers and, in the process, deliver substantial value for our shareholders," said CVS Health CEO and President Larry Merlo.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com

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