Health insurance can be found in Aisle 6

Posted by Stephen Lubiak from Ogilvy CommonHealth Worldwide — North America on November 2, 2017

Some people were surprised by CVS’s offer to buy health insurer Aetna, but payer marketers know that this event follows trends that we have long observed. 

Trend 1: Payers and providers have been consolidating for years.


The basic rationale is that, by controlling more of the health care delivery process, the payer (health plans) can optimize care and manage costs better. We see this in recent reports of health plans and pharmacy benefits managers (which manage drug benefits for payers and their members) continuing to unite. UnitedHealthcare bought Catamaran a few years ago; Anthem is starting its own internal PBM (with CVS as the engine) after its divorce from Express Scripts, and now CVS wants to acquire a health plan.


Can these new entities maximize their profits by controlling more of health care delivery? And, if they collect and analyze a larger set of data about patients’ health care interventions and utilization, how will they use it—to improve outcomes, lower costs, or both?

Trend 2: CVS continues its move away from traditional retail.


For CVS, retail sales amounted to 46% of total revenue in 2016, down from 52% in 2013. Years ago, it acquired PBM Caremark to expand its drug supply chain to include mail order and a specialty pharmacy, and it has also expanded the CVS MinuteClinic, a retail health clinic that provides limited health care services.


Is a relationship with a “patient” stronger than one with a “consumer”? Maybe. The question will be if it is more profitable.

Trend 3: Overall, retail is being transformed by e-commerce, and the big threat is Amazon.


Remember when we purchased books in stores? Amazon changed that business model in many ways: pricing, distribution, and shopping habits. Now, some will say that picking up a prescription at the corner brick-and-mortar pharmacy is an area that is also ripe for similar transformations, just like the old bookstore model. Others will argue that patients are different from “regular” consumers, and need more hand-holding.


And, will Amazon be able to handle the cumbersome regulations in the pharmacy business?



What does this mean for pharmaceutical manufacturers?


Well, it’s probably more of the same: further consolidation of patients and providers into larger organizations, so that your resulting “customer” for drug purchases holds much power. Manufacturers will need to continue their efforts to generate and publicize the evidence that differentiates their products for patients or for patient subpopulations.


For consumers/employees/patients: on the one hand, employees might be part of a larger health plan and/or PBM that makes purchase decisions for them. On the other hand, the obligation to understand health, health care, and insurance grows larger for individuals, and their role in selecting and adhering to drug therapies is important. Manufacturers may help if they can generate evidence and communicate it to patients/consumers in an effective way and bolster patient outcomes.


Time will tell if the consolidation trend continues…and if it succeeds.



Drug Price Squeeze Is Driving CVS and Aetna Talks. The Wall Street Journal. October 26, 2017. Accessed October 27, 2017.


The Real Reason CVS Wants to Buy Aetna? Amazon. The Wall Street Journal. October 27, 2017. Accessed October 27, 2017.


CVS Is Said to Be in Talks to Buy Aetna in Landmark Acquisition. The New York Times. October 26, 2017. Accessed October 27, 2017.


Anthem to Launch Its Own Pharmacy Benefit Manger. The Wall Street Journal. October 18, 2017. Accessed October 30, 2017.