Contact Us

UPDATE: CVS-Aetna $69B Deal To Transform Retail Sites Into Community Healthcare Hubs

UPDATE, OCT. 10, 9:10 A.M. ET: The Justice Department greenlit CVS Pharmacy’s $69B purchase of health insurance giant Aetna. Antitrust officials approved the deal on the basis that the merged company offload Aetna’s Medicare Part D prescription drug business, the Washington Post reports. Experts posit the combined companies will result in the creation of one-stop-shop healthcare clinics using CVS’ large retail footprint across the country. Read more about the potential impact of the merger below.

In a move that analysts predict could disrupt the healthcare industry like Amazon’s Whole Foods Market acquisition disrupted retail, CVS Health will acquire Aetna for $69B and leverage its retail footprint to create one-stop-shop healthcare clinics across the U.S.

A CVS HealthHUB in Houston. The company is planning to expand the concept.

The goal is to bridge the gap between doctors, pharmacists and other healthcare professionals for consumers, making access to healthcare benefits less expensive and the physical act of going to the doctor or picking up prescriptions more seamless. 

“This should accelerate its clinic and home health business growth, while also increasing store traffic. Also, CVS retail locations would allow it to market Aetna health insurance plans to individuals, small businesses [and more],” Wells Fargo Securities analyst Andrew Dunham wrote in a note about the pending acquisition.

With a portfolio of 9,700 retail pharmacies and 1,100 walk-in medical clinics, called MinuteClinic, CVS is the largest retail pharmacy chain and retail clinic operator in the country. 

The Woonsocket, Rhode Island-based retailer has not announced plans to expand its footprint, but Morningstar analyst Vishnu Lekraj said the company will need to revamp stores to better accommodate clients and make room for its new services. 

Once renovated, CVS Pharmacy locations will house wellness, clinical and pharmacy services, in addition to vision, hearing, nutrition, beauty and medical equipment. 

“I don’t believe CVS will expand. I think they will have to look at their stores and redo them. They haven’t come out with an exact plan yet, but are going to roll out a couple of different concepts and market test different ways to roll this out. I won’t expect to see any major strategy or [changes] until late 2018,” Lekraj said. 

Thriving Retail Clinics


The way in which Americans receive their medical care is changing, and CVS wants in on the action.

Patients today, particularly younger Americans, often prefer to visit a retail center down the street from their homes rather than make repeated trips to the hospital to see a primary care physician.

Research shows many millennials have yet to secure a primary care physician, largely because they do not often have recurring illnesses like older patients, ANA Healthcare reports. The immediacy and transparency of retail clinics also greatly appeals to the younger generation.

"Driving [retail clinic] growth is waiting times at physician offices, increased healthcare coverage and the desire of payers to avoid ER visits for non-emergencies,” Kalorama Information Publisher Bruce Carlson said in a statement. “These growth drivers are also drivers for other companies like Walgreens and The Little Clinic; they are drivers for urgent care centers and for telemedicine."

There are roughly 2,225 retail clinics in the U.S., according to Kalorama Information, and continued growth in the segment is expected. Dublin-based Research and Markets estimates the U.S. retail clinic market will grow at a compound annual growth rate of 20.3% to $7.3B by 2025. 

In 2015, CVS acquired Target Corp.’s 1,672 pharmacy and clinic businesses for $1.9B, rebranding the outlets and opening several new clinics on Target sites under the CVS Pharmacy and MinuteClinics banner. Now the chain is the largest retail clinic operator in the country, with nearly triple the MinuteClinic locations of runner-up Walgreens, which operated 356 Walgreens Healthcare Clinics as of February, according to Drug Channels Institute

Threat To U.S. Hospitals? 


News of the $69B merger sent the healthcare industry into uproar, particularly U.S. hospital operators. Concerns persist that in-store clinics will upend the industry and eat into patient visits to hospitals.

Forbes contributor Bruce Japsen, who has covered the healthcare market for roughly 30 years, said CVS’ healthcare hubs could be detrimental to U.S. hospitals, especially as more than 43 million Aetna members will be able to access these healthcare hubs. 

“This is bad news for the nation’s hospitals, which still see millions of patients in their emergency rooms and provide care for ailments that CVS and Aetna executives say could be avoided or directed to an outpatient location,” Japsen wrote in a Forbes article

Still, retail clinics are overwhelmingly used by millennials and young adults, and some experts say CVS-Aetna would need to garner support from older patients to truly hurt hospital operators. 

If approved, CVS-Aetna’s merger could resolve those particular pain points within the healthcare system that make going for a doctor’s visit and to the pharmacy to pick up prescriptions particularly inconvenient. CVS’ healthcare hubs aim to be a physical place for patients to come, engage with medical professionals, ask questions and get the assistance they need. 

"With the analytics of Aetna and CVS Health's human touch, we will create a healthcare platform built around individuals. We look forward to working with the talented people at Aetna to position the combined company as America's front door to quality health care, integrating more closely the work of doctors, pharmacists, other health care professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers,” CVS CEO Larry Merlo said in a statement.

CVS will pay Aetna shareholders $145/share in cash and 0.8378 CVS shares for every Aetna share. The deal remains subject to Aetna and CVS shareholders, and is expected to close in the latter half of 2018.