Amazon Is Already Reshaping Health Care

Apr 5, 2018 | Uncategorized

Its threat alone has helped speed consolidation, and consumers may suffer. nnWithout having done much yet, Inc. is already transforming U.S. health care — and not necessarily for the better.nnThe mere threat of the online giant getting into the health business prompted the country’s two largest pharmacy benefit managers — CVS Health Corp. and Express Scripts Holding Co. — to join forces with two of its largest insurers, Aetna Inc. and Cigna Corp. These deals will put more U.S. health care under the control of fewer companies. The merging companies say this will lower costs for consumers and the country. But the reality will likely be less rosy and more complicated.nnThat these companies can even make such deals is due partly to the Federal Trade Commission and the Department of Justice, which blocked the mergers of Anthem Inc. with Cigna and Aetna with Humana Inc. Those mega-insurers would have been too busy digesting to make big vertical deals and too large to be acquired by other insurers.nnUnitedHealth Group Inc. has been another major motivator for these mergers. It successfully pioneered a strategy of aggressive diversification by buying a large PBM in 2015 and with its Optum health-services unit. The gravitational pull of its success — it leads peers in patient enrollment, revenue growth, and market valuation — has inspired copycats. Profit pressure on PBMs, meanwhile, likely helped make them receptive to merging with insurers.nnBut Amazon’s long shadow also helped instigate these deals. With its technological prowess, long investment horizon, bottomless appetite for new business and tolerance for thin margins, any mention of its interest in health care rattles investors, particularly in the industry’s middlemen.nnIf the deals go through, the result will be an unprecedented level of market concentration.nnAll three of the biggest U.S. PBMs will be tied to three of the country’s biggest insurers. CVS, Express Scripts, and UnitedHealth process more than 70 percent of all U.S. prescriptions. Post-merger, three companies will insure more than 90 million people in some capacity, process more than 3.5 billion prescription claims, and generate more than $500 billion in revenue.nnNot every American will have both their medical and drug benefits managed by the same company. But many more will in the years to come. These integrated companies have more information about their customers and more ability and incentive to manage the totality of their health spending.nnUnitedHealth is already all-encompassing, with its continuing investment in everything from ambulatory surgery centers to physician groups. CVS and Aetna — which will add retail pharmacies and primary care clinics to the equation — could have an unprecedented role in patient lives. Read More >>nnCLICK HERE to view original article in it’s entirety, including informational charts, graphs and author info.