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Hospital Impact has been ranked one of the top 50 healthcare blogs by Wikio.
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By Tony Chen
By now we've all heard the news that CVS is acquiring Caremark for $21.2B in stock. Combined revenues will $75B. CVS CEO Tom Ryan said, "This is all about giving the consumers unparalleled access and choice ... It will help providers deliver the right drugs at the right time" (read: "We can't let WalMart drive us off the map")
What does this merger mean for:
- Other PBMs - they all becoming acquisition targets. It only takes a spark to get the fire going. Watch out ExpressScripts and Medco, your days are numbered. The most interesting piece will be who will reach out to buy them first - big drug stores like Walgreens? Or... remember back when Merck used to own Medco? And Caremark was a business unit of Baxter? Or maybe they'll just buy each other out.
- CVS - questions will arise on whether they can effectively integrate all their recent acquisitions (Sav-On Drug, MinuteClinic). So many acquisitions are failures mainly due to the lack of cultural integration. Since one company is B-to-C and the other is B-to-B, we'll see if they can effectively integrate. Other questions will arise regarding whether they can truly obtain even better pricing than they already do now as huge stand-alone companies (Caremark has a $1B market cap). Nonetheless, I've got to hand it to 'em - as stodgy as CVS is as a brand, they sure are making some aggressive bets. Remember also - even if they can't "integrate" very well, they got Caremark for a pretty decent price.
- Pharma companies - They lose some margin with CVS increasing its leverage. If you were a book publisher, this would be like Borders purchasing amazon.com.
- Hospitals - Mostly, we won't feel it. Nonetheless, our own independent pharmacies will face increasing competition from lower and lower prices from CVS, mail-order, & cheap WalMart generics. In addition, does this impact MinuteClinic's ability to get into CVS locations as planned? As more CVS exec time goes to merger integration, that means less time for evaluation/planning of MinuteClinic's rollout. For hospitals considering how to engage the retail clinic phenomenon, doesn't this come into play?
- You and I as consumers - maybe all of these guys will share some of the "savings" with us! Let 'em fight over us.
by the way, is $21B the magic number in healthcare? The last big transaction we were talking about was also $21B.
