CVS-Aetna merger? Here's what the 'good friend' CEOs have said.

On Thursday, The Wall Street Journal first reported that CVS Health (CVS) had been in talks to buy Aetna (AET) for more than $200 per share, or around $66 billion.

Some analysts were quick to call such a deal “insane.” Many analysts saw an opportunity to streamline and cut costs in the drug supply chain. A few analysts suggested this could be the beginning of big changes in the way healthcare is handled America, where costs are unusually high and rising.

In recent weeks and months, Aetna CEO Mark Bertolini and CVS CEO Larry Merlo have both separately spoken publicly about problems in US healthcare and they both advanced solutions they’ve had in mind. The two, who are ‘good’ friends, even acknowledged that they talk to each other.

Their own words would suggest a merger between CVS, the drugstore retailer that also operates walk-in clinics and a pharmacy benefit manager, and Aetna, the nation’s third-largest insurer, could the beginning of falling healthcare costs.

Why can’t CVS be the first stop for healthcare?

“We are talking with CVS who has 9,000 stores within 3 miles of 80% of the American public,” Bertolini said at a Fortune magazine event this spring. “Should [CVS] be in the business of seasonal items or DME? Why can’t they be first stop outside the home in the community for healthcare when they are right around the corner?”

He added that people see their pharmacist a lot more than they see their doctor.

“We gotta get this sort of sense in the community that we are there for them,” Bertolini told Fortune. “And there are all sorts of resources available to ready to deploy. It’s really a logistical capability.”

Speaking at Yahoo Finance’s All Markets Summit last week, Aetna’s CEO made a case for why the U.S. healthcare delivery system is broken. He pointed out that the U.S. spends the most on healthcare among the OECD nations, but still falls behind.

“When you add together our healthcare spend and our social spend, we are now 11th among the OECD nations. We are the only nation that spends more than 40% on healthcare,” Bertolini said. “The rest of the nations spend less than 40% on healthcare. The United States spends 62%. Our lack of investment in social determinants of health has led to a ranking of we are No. 34 out of 34 in the OECD nations from the standpoint of value. So this is a value problem.”

Yahoo Finance’s Julia La Roche interviews Aetna chairman and CEO Mark Bertolini. (Cindy Ord/Getty Images)

Bertolini has long argued that the way to address soaring healthcare costs is by fundamentally changing how America thinks about healthcare. Currently, it provides “too little” focus on creating “productive, viable, happy people.” Essentially, the lack of investment on the social side is what’s driving healthcare costs. To illustrate his point, Bertolini highlighted the opioid epidemic, noting that Americans consume 80% of the opioids produced.

“We have a society that is not happy,” he said.

At the moment, the U.S. healthcare system is focused on waiting until people are broken to fix them. That’s not working. As a result, Bertolini thinks the definition of health needs to be redefined.

“I think we should define health is a healthy person is productive, a productive person is socially, economically, and physically viable and viable people are happy,” he said.

To achieve this, thinking about health needs to be moved from the exam table to the kitchen table, according to Bertolini. In other words, they have to get into the home.

Pharmacists can play a much more active, supporting role

At a breakfast hosted by the Economic Club of New York this month, CVS CEO Larry Merlo also made a case of how the pharmacist could play a more active role.

“There is tremendous opportunity to make healthcare much more effective by engaging with patients more frequently where they are in coordinating care to make a complex system much easier to navigate,” Merlo said.

He went on to cite some jarring statistics about healthcare costs. About half of the U.S. population has a chronic illness with more than 80% of all healthcare spending going toward treating those illnesses. Ineffective management of chronic illness and medications associated with those diseases has resulted in more than $300 billion in avoidable costs, according to Merlo.

CVS Health CEO Larry Merlo. (Economic Club of New York / YouTube)

Merlo added that half of the patients don’t take medicine as prescribed and up to one-third of prescriptions written don’t get filled. One in five patients discharged from the hospital will be readmitted within 30 days. Many of those readmissions are preventable and often relate to a medication issue.

He called this “simply unsustainable” and why the pharmacist is essential.

“Pharmacists can play a much more active, supporting role in each person’s unique health experience from advising them on the best use of their medications and improving medication adherence or helping to coordinate care more effectively among a patient’s healthcare providers,” Merlo said.

Credibility

CVS, which he called the “front door” to healthcare, touches the lives of one in three Americans. When it’s come to addressing the opioid crisis, CVS decided to place a limit of 7 days of medication for certain acute prescription needs.

Just a few years ago, CVS decided to remove cigarettes and tobacco sales from inside its stores. CVS was pretty much alone in that move. Merlo is hoping that it will be different when it comes to addressing the opioid issue.

“It’s simply the right thing to do. I think on the tobacco decision we knew that was the right decision for our company as we were becoming more of a healthcare company,” Merlo said at the Economic Club.

“I see my good friend Mark Bertolini here from Aetna. I remember Mark and I talking about that decision. You know, how do you have credibility to do all the things that we talked about this morning and at the same time you’re delivering healthcare in the back of the store you’re selling tobacco products in the front of the store? We saw that as a credibility and an integrity issue.”

To date, CVS has seen a decline in the number of opioid prescriptions they dispense by as much as one-third in the last four years, Merlo said.

Watch Aetna CEO Mark Bertolini’s full interview from Yahoo Finance’s All Markets Summit:

 


Julia La Roche is a finance reporter at Yahoo FinanceFollow her on Twitter.

By using Yahoo you agree that Yahoo and partners may use Cookies for personalisation and other purposes