While acquisitions in other sectors have been driven by the pursuit of economies of scale, the health insurer consolidation is seen as a consequence of the Affordable Care Act.
The health insurer megadeals, which reached a crescendo last month with Anthem Inc.’s $48 billion purchase of Cigna Corp. and Aetna Inc.’s $34 billion acquisition of Humana Inc., provide fast access to the millions of people who have gotten health coverage under the ACA. The deals are especially good for capturing Medicaid business, which has expanded dramatically under the health care law.
Outside of new business resulting from the ACA, the newly enlarged insurers can go after the growing rolls of Medicare Advantage plans, which are private versions of the federal insurance for seniors. Medicare Advantage enrollees are among pharmacies’ biggest consumers, considering that four out of five older adults live with one or more chronic conditions.
One survey of Medicare beneficiaries found that 20% were taking five or more maintenance medications. While the 65-and-older age bracket represents just over 13% of the population, seniors consume 40% of prescription drugs.
But while the insurance consolidation will allow plans more power to negotiate prices with health care providers, chain pharmacies have established their own power — especially chain drug stores, which dispense more than half of all prescriptions (with CVS/pharmacy, Walgreens and Rite Aid Corp. accounting for the vast majority).
Anthem president and chief executive officer Joseph Swedish said the purchase of Cigna will mean “expanded provider collaboration, enhanced affordability and cost-of-care management capabilities, and superior innovations that deliver a high-quality health care experience for consumers.”
Mark Bertolini, Aetna’s chairman and CEO, said the Humana acquisition “will allow us to continue to invest in excellent service for our members and strengthen our partnerships with providers to deliver high-quality care at an affordable price.”
With the deals, Anthem and Aetna will have annual revenue of $115 billion or more, putting them in a position to rival UnitedHealth Group, which led the industry last year with $130.5 billion.