Big Changes in Health Care: One Merger at a Time

Why your health insurance and drug store may soon be one company

Aetna, a health insurance company with $63 billion in revenues, has agreed to be purchased by CVS Health, a $178 billion company. Assuming the feds don’t object, which is not very likely, everyone is asking, why are these two very different businesses coming together? Having watched the health insurance industry, and having served a few of them as their ad agency, here’s my take on this:

1. Improving Efficiencies

Health insurance companies aim to improve both health outcomes and the providers’ delivery efficiency to reduce insurance payment costs, especially for people with chronic diseases, which account for 80% of healthcare costs. Aetna currently can’t do this well enough or fast enough on its own because it lacks the opportunity to interact with the patient in the moment of truth: the conversation between a pharmacist and a patient. Research shows that 50% of chronically ill people fail to adhere to their physician-prescribed medication and treatment plans. This increases waste, and results in unnecessary, high-cost acute care for hundreds of thousands, which needlessly drives up the costs of healthcare for everyone. Imagine if your pharmacist is now also your insurer. Perhaps your conversation will carry a little more weight when the amount of your co-pay may be adjusted when it is directly based on your behavior.

2. Industry Simplification for Happier Consumers

The two companies envision the nearly 10,000 CVS stores as convenient places of health and wellness services. Minute clinics are growing because of convenient access, and because they are filling the gaps left by declining private physician practices which are consolidating into health systems. Imagine a health insurer who actually delivers basic health care services next to your dry cleaner. More importantly, the learning, data and intel that the insurer can leverage from that retail interaction can change how people are treated and actually improve their health and their lives. Insurers may actually have the opportunity to leapfrog from being an industry that consumers love to hate to one that consumers actually like.

3. Data and the Customer Experience

From a business standpoint, both insurers and drug stores have to change to be competitive and relevant.  Insurers are now dependent on Medicaid and Medicare for almost two thirds of their revenue, which increases their vulnerability. Drug stores force customers to wait in lines and often don’t provide a pleasant customer experience. Since Amazon started talking to pharmaceutical companies, and has been making some noise about entering the drug delivery market to increase consumer convenience and reduce costs, it has both insurers and pharmacy benefits managers/retailers on high alert. Aetna and CVS will need to invest in big data and user experience to head Amazon off at the pass or to slow its entry. Can they actually do it? The way to do so is to design and deliver a quality retail customer experience where the pharmacist and healthcare practitioners get to know your name, protect your privacy and get you in and out quickly. It will also help if they give you CVS Health Points for complying with your treatment plan so you can save $20 on your electric razor or hair blower.

So why is a marketer talking about the Aetna and CVS merger? This is a huge revolution. The health care industry is changing, and as marketers, we can learn and take notes as we see this industry becoming increasingly innovative.

December 5, 2017
Written by Tom Sullivan