The reported $66 billion proposal by CVS Health to buy Aetna may have been a reaction to Amazon’s anticipated entry into the pharmacy business, which could lead to a flurry of merger and acquisition (M&A) activity in the sector.
The Los Angeles Times reports Amazon winning approval for pharmacy licenses in 12 states could force others to look for ways to diversify their profit streams and their delivery models. Insurers have already been spurning pharmacy benefit managers, as was the case with Anthem ending its relationship with Express Scripts to form its own PBM in partnership with CVS.
CVS needed to diversify due to declining revenue at its stores. If Amazon—the third-largest company in the U.S. with market capitalization of $524 billion—other companies could “scramble to protect their market share.”
“If Amazon jumps in the pharmacy pool they will make a loud splash and cause major M&A in this arena over the coming months,” Daniel Ives, chief strategy officer and head of technology research for GBH Insights, told the Times.
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John joined TriMed in 2016, focusing on healthcare policy and regulation. After graduating from Columbia College Chicago, he worked at FM News Chicago and Rivet News Radio, and worked on the state government and politics beat for the Illinois Radio Network. Outside of work, you may find him adding to his never-ending graphic novel collection.