Combined CVS and Aetna Will Be the 2nd Largest Company by Revenue in America

Saturday, October 28, 2017


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A combined CVS and Aetna company would be the second largest revenue company in the United States — at $240 billion — ahead of Apple ($215B) and Berkshire Hathaway ($223B). The only company in America doing more revenue would be Walmart ($485B).

The biggest winner in the proposed acquisition of Aetna by CVS may be Rhode Island.  The deal is one of the biggest business deals in the United States will transform the company and its roll in healthcare in America.

“It positions CVS Health as a disrupter instead of the disrupted. It's obvious from our national healthcare policy debate -- and the growing number of families that can't access or afford the healthcare -- that we need transformational new healthcare business models. Tweaking today's healthcare models isn't working,” said Saul Kaplan, Founder and Chief Catalyst at Business Innovation Factory.

One of the largest real estate developers in Rhode Island, Joseph Paolino, says, “CVS buying Aetna is big. The purchase shows this iconic Rhode Island corporation will continue to grow."

CVS is reportedly paying $66 billion for Aetna. The deal ranks as the eleventh largest merger and acquisition deal since 2010 -- tied with Monsanto and Bayer merger.

Governor Gina Raimondo tells GoLocal, "This is potentially exciting news for one of Rhode Island's homegrown companies. We look forward to learning the details." 

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Is Aetna the perfect partner?

Big Strategic Move

The Dean of the School of Business at Providence College says the deal can't be underestimated in light of the importance of the acquisition.

“It is a big reputation and visibility win for [the state] because CVS Health is one of state’s largest companies by revenue and it adds another win in CVS’ efforts to demonstrate a forward-looking stance. CVS Health has been steadily and successfully transforming itself from a CPG company to a health sector company,” said Dr. Sylvia Maxfield of PC.

“A handful of large 'platform' companies like Amazon and Google increasingly control the household consumption experience and this move by CVS will help it position for that future," added Maxwell, but warned, “What it means for employment remains to be seen.”

It is likely that the combined company will trim jobs — but pre-acquisition, CVS employs 243,000 and Aetna employs 49,500. Obviously, all jobs are not equal as many CVS jobs around the country are lower paying frontline retail jobs.

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Gary Sasse

Gary Sasse, who heads the Hassenfeld Institute at Bryant University, tells GoLocal, “A CVS and Aetna merger could prove to be an impressive strategic move for both companies. With the pharmacy market potentially ready for e-commerce, this merger could be an attempt by CVS to strengthen itself against long-term competition from Amazon entering the pharmacy business. It would also permit Aetna to have a health services unit to compete with United Health's Optum.”

But, Sasse warns the federal regulatory review may be significant, “However, a deal between the number one drugstore chain and number three health insurer by revenue may garner the vigorous attention of the U.S. antitrust enforcement agencies. Stay tuned.”

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Innovation of Healthcare

The threat to CVS is that Amazon enters the pharmacy business and affords their customers the same ease and efficiency as the company does in almost every other vertical market - and CVS doesn’t want to see the same fate as Benny’s. This year set a record already for the largest number of retail store closings.

Since January 1, retailers have announced plans to close more than 6,700 stores in the U.S., according to Fung Global Retail & Technology and that eclipsed the great recession year of 2008 — the total that year was 6,163.

“It's in Rhode Island's best interest that CVS Health remains a leading innovator bringing new healthcare models to the market rather than playing defense and watching disrupters like Amazon enter and take over the market. We know what it means when local companies play defense instead of leading the way. Rhode Island has watched this movie for a long time as the home of the industrial revolution which has long since ended. We need more Rhode Island companies to lead the way to redefine the industries they compete in,” said Kaplan.

Sasse says the move is bold and may, in fact, be a driving force to reinventing healthcare in America, “From a healthcare perspective it could hasten the restructuring of the industry by enhancing negotiations with pharmaceutical companies, and impact competition for pharmacy-benefit services and clinic development,” said Sasse.


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