(Reuters) – Aetna Inc’s (AET.N) board of administrators was assembly on Sunday to approve the U.S. well being insurer’s sale to U.S. drugstore chain operator CVS Well being Corp (CVS.N) for roughly $207 per share in money and inventory, in response to individuals accustomed to the matter.
The $68 billion deal will likely be this 12 months’s largest company acquisition. It can mix one of many nation’s largest pharmacy advantages managers (PBMs) and pharmacy operators with certainly one of its oldest well being insurers, whose far-reaching enterprise ranges from employer healthcare to authorities plans nationwide.
CVS plans to pay for the deal largely with money, however it can additionally use its personal inventory to pay for round 30 % of the acquisition value, the sources mentioned. The announcement of the deal may come as early as Sunday, the sources added.
The sources requested to not be recognized as a result of the deliberations are confidential. CVS and Aetna didn’t instantly reply to requests for remark.
The deal comes as healthcare payers and pharmacies are responding to elements together with the Inexpensive Care Act, rising drug costs and the specter of competitors from on-line retailers reminiscent of Amazon.com Inc (AMZN.O).
CVS plans to make use of its low-cost clinics to finally save greater than $1 billion per 12 months on well being care prices for Aetna’s roughly 23 million medical members, sources have mentioned.
A mixed insurer and PBM can even possible be higher positioned to barter decrease drug costs, and the association may increase gross sales for CVS’s front-of-store retail enterprise.
The corporate expects to speculate billions of within the coming years so as to add clinics and companies, largely financed by diverting funds away from different deliberate investments.
That would finally lower prices considerably, with the clinics serving as an alternative choice to dearer hospital emergency room visits.
In the meantime, deeper collaboration between Aetna’s insurance coverage enterprise and CVS’s PBM division may drive down drug prices by including shoppers and boosting the PBM’s leverage with drugmakers.
Unbiased PBMs have lengthy been criticized for potential conflicts of curiosity with insurance coverage firm shoppers, as a result of they might probably preserve price financial savings from drug negotiations reasonably than passing them on to sufferers.
Aetna affected person visits to CVS shops for well being care and prescriptions may additionally increase front-of-store gross sales, which like these at many retailers have fallen in latest quarters amid competitors from on-line sellers.
Well being insurers in the meantime have sought to chop prices amid steep prescription drug value rises and necessities to look after even the sickest sufferers underneath the Inexpensive Care Act.
Aetna final 12 months tried to purchase rival Humana Inc (HUM.N) to achieve leverage to regulate prices, however U.S. antitrust regulators shot down that transaction and a proposed merger between Anthem Inc (ANTM.N) and Cigna Corp (CI.N).
Analysts have mentioned the CVS-Aetna deal may immediate different healthcare sector mega-mergers, as rivals scramble to emulate the technique.
It may spur a merger between Walgreens Boots Alliance Inc (WBA.O) and Humana Inc (HUM.N), or between Humana and Wal-Mart Shops Inc (WMT.N), Ana Gupte, analyst at Leerink Companions, mentioned just lately.
Though CVS and Aetna’s deliberate merger doesn’t straight consolidate the medical health insurance or pharmaceutical industries, the U.S. Division of Justice has been taking a more in-depth take a look at so-called vertical mergers, the place the businesses are usually not direct rivals.
Final month, the Justice Division sued to dam AT&T Inc’s (T.N) deliberate $85.four billion merger with Time Warner Inc (TWX.N), saying the combination of a content material producer with a distributor may cut back client selection.
The CVS-Aetna deal may appeal to related scrutiny if regulators feared it may block Aetna prospects from frequenting different pharmacies or contracting with different PBMs, a number of buyers mentioned, asking to not be named as a result of they weren’t approved to speak to the press.
However 4 antitrust consultants mentioned there may be little doubt the deal will likely be permitted, though it’d want to satisfy circumstances to persuade antitrust enforcers to log off.
It’s unclear whether or not it might be evaluated by the U.S. Federal Commerce Fee or the Justice Division however that call could be made based mostly on which company is much less busy, mentioned Matthew Cantor of regulation agency Constantine Cannon.
“(The businesses) need the FTC to get it. The explanation that the FTC is best at this level is that the Justice Division has simply damaged with many years of precedent of find out how to take care of vertical mergers,” mentioned Cantor, referring to the choice to refuse conduct treatments and file a lawsuit to cease AT&T from shopping for Time Warner.
Reporting by Carl O’Donnell and Greg Roumeliotis in New York; Further reporting by Caroline Humer in New York and Diane Bartz in Washington; Enhancing by Meredith Mazzilli and Lisa Shumaker