CVS Health Corp.'s deal to buy insurer Aetna Inc. for about $67.5 billion could be just the start of a new wave of health care takeovers.
The merger announced Sunday will leave one less independent player in the complex web of insurers, retailers and other middlemen that sit between patients and their care — and who are under pressure to reduce costs.
CVS, based in Woonsocket, Rhode Island, made its move on Aetna less than a year after two major health-insurance takeovers were blocked by the Justice Department on antitrust grounds, and as rumors swirl about a disruptive entry into health care by tech retail giant Amazon.com Inc.
"You could see potentially two other big deals," such as an insurer buying a rival or a pharmacy-benefit company, said Jeff Jonas, a portfolio manager at Gabelli & Co., which owns shares of Aetna and CVS. Smaller players, like walk-in urgent-care clinics, could also get snapped up by health insurers, he said.
Here's who's left:
Health Insurers
Insurers are looking for two things: more control over how their consumers get care, and scale. They also have something buyers want: the ability to steer millions of customers to services and health providers.
Among the most likely deals is a merger between Cigna Corp. and Humana Inc., the fourth and fifth largest publicly traded health insurers by market value, says Jonas. Such a combination would test antitrust enforcers after they blocked deals between Aetna and Humana, and Anthem Inc. and Cigna.
WellCare Health Plans Inc. and Centene Corp., freestanding insurers that offer government plans, could become targets, according to Matthew Borsch, an analyst at BMO Capital Markets.
Stranger combinations are possible, as well. Wal-Mart Stores Inc. could buy Humana, Leerink Partners analyst Ana Gupte said Monday. The companies already have a co-branded Medicare drug plan that steers patients to Wal-Mart stores.
Express Scripts
CVS's biggest competitor in the pharmacy-benefits-management space is Express Scripts Holding Co. The PBM is at a vulnerable point after its largest client, Anthem, recently said it plans to leave.
