Editor's note: Staying a step ahead of Amazon
Whether CVS buys health insurer Aetna or not, any retailer that operates a pharmacy is about to see a dramatic change in how it competes in the future.
CVS Health has offered to purchase Aetna, the nation’s third-largest insurer, for a cool $66 billion in the hopes, according to industry observers, that it can cut out the middleman and drive drug prices dramatically lower. It all makes complete sense. The chain will have direct access to a major insurer, and can work more closely with pharmaceutical companies to keep prices lower for its customers. Lower prices equal happier shoppers, which means more store traffic in the never-ending battle for market share between retail operations. In other words, CVS will be able to dictate the rules to a much larger degree.
Who knows whether this deal will happen? At press time, few could predict whether CVS Health will go through on its offer, or if this was just a move by the drug store chain to dip its toe into the financial world and see how cold the water is. But, no matter whether CVS Health moves ahead or not, the damage is already done. Just the announcement that this could happen has three industries — retailers, insurers and pharmaceutical operations — in a tizzy about what this could mean for them, both in the short term and over the long haul.
What it means is gaining more control over the price structure of your business, while you still can. Am I the only one who thinks that the growth of Amazon.com and its move into retail, with the purchase of Whole Foods last summer, has something to do with this? It most definitely does. Amazon is going to get into the prescription business soon, and when it does all hell is going to break loose among retailers and suppliers.
CVS Health is trying to get ahead of the mayhem and establish itself as the go-to player in this market — on paper and in the minds of the consumer. Buying Aetna will give the retailer a step up on the competition, and that includes the big bad wolf — Amazon — hanging around waiting to enter the hen house.
If they have not done so already, other retailers, including Walgreens, Walmart and supermarkets, will have to react and look to develop their own partnerships or programs to keep the playing field as level as possible. That may include developing closer ties with insurers, distributors or even other retailers. But CVS Health’s overture is raising eyebrows and opening eyes to the reality that the days of simply staying the course and hoping for the best are long gone. Those that survive in the future will be the merchants who think outside the box more and more.