Fitch: 5 observations on healthcare M&A in 2017 and beyond

Written by Laura Dyrda | December 19, 2017 | Print  |

Fitch weighed in on CVS Health's proposed acquisition of Aetna, finding the deal "well aligned with U.S. healthcare trends."

Here are five key trends from Fitch's report:

1. While healthcare companies are seeing strong organic growth, increasing pressure on prices suggest healthcare consumers will struggle to meet the financial burden of purchasing healthcare products and services. Strategic acquisitions have helped organizations adjust their business model to protect against pricing power, and that trend will likely continue.

2. Healthcare providers, insurers and pharmacy benefit managers are characterized by vertical consolidation because they define value as the ability to drive down costs for consumers. These companies are better positioned to manage care and patient outcomes with controlled costs.

3. Healthcare reform has reinforced vertically integrated companies to balance access of care with affordability and quality.

4. Amazon is rumored to have interest in the pharmaceutical supply chain business, which is driving other healthcare companies to show they can reduce inefficiencies contributing to the high cost of healthcare. Amazon could be a disruptor in the field, where outside disruption hasn't been common in recent years.

5. As a combined company, CVS and Aetna could become a standalone PBM business model, which are often non-transparent and rely on pharmaceutical manufacturer rebates. "We don't think the integrated PBM business model used by UnitedHealth and now potentially a merged CVS and Aetna resolves this inherent weakness and perhaps even exacerbates the rebate model's opacity," according to the report.

More articles on supply chain:
Will Amazon enter pharmacy? 5 things to know
What ASCs should do to stay ahead of hurricane-caused drug shortages—4 insights
Achieving cost-savings in an ASC's supply chain, inventory program: 5 tips for success

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