CVS and Aetna eye competition from Amazon, but the real race is with UnitedHealth

When news broke that CVS Health and Aetna might merge, all eyes turned to Amazon. The e-commerce giant has reportedly been eyeing the pharmaceutical industry, causing industry experts to speculate that CVS and Aetna are merging in an attempt to compete with the online retailer.

But as Chad Terhune of The Los Angeles Times points out, UnitedHealth Group could prove to be just as big of a competitor as Amazon. With over 45 million members in the U.S., UnitedHealth holds the title for America’s largest health insurer.

If CVS and Aetna want to claim that title, they’ll have to contend with Optum, UnitedHealth’s information technology and services firm. Optum has already established itself a dominating force in the pharmaceutical industry, with over 100 million prescriptions filled each month.

“People have gotten carried away with Amazon,” said healthcare analyst Ana Gupte, who works for investment bank Leerink Partners. “CVS and Aetna is an Optum wannabe. UnitedHealth is the winning business model, and Optum is showing the way.”

But while a potential merge between CVS Health and Aetna could certainly bring forth a lot of benefits like improved coordination between providers and cheaper care, former federal antitrust lawyer Thomas Greaney warns that it also carries a huge risk.

“You want to encourage efficiencies and integration that helps promote better care and lower costs. But you don’t want that to turn into a local monopoly,” said Greaney, who now works as a professor at the University of California’s Hastings College of the Law in San Francisco.

Farzad Mostashari, former National Coordinator for Health Information Technology at the U.S. Department of Health and Human Services, believes it’s still too early to tell whether a CVS-Aetna merge would make things better or worse for consumers. Mostashari, who is now the CEO of tech startup Aledade, believes it’s certainly worth considering how these types of deals could put rivals at a disadvantage.

“These vertical mergers can create competitive challenges where you use your dominant market position to tip the ball to yourself in another area,” Mostashari said.

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