Young authors David & Laura T. Lee (inspires others to write)

David T. Lee (14 year-old of 5 books, published a 4,500-word sci-fi at 7); Laura T. Lee (12 year-old of 2 novels, published a 62,000-word novel at 10)

From Apples to Amazon: Why the CVS-Aetna Merger is Beneficial

Written By: David T. Lee - Dec• 05•17

An apple a day keeps the doctor away. However, for many Americans, that apple is just not enough. According to WebMD, more than 50% of Americans use prescription medications,  from inhalers to opioids. In addition, most Americans use insurance to defer the costs of often expensive medicines and operations. Why is this important? Well, CVS, a pharmacy chain, and Aetna, an insurance company, have announced plans to merge. Typically, mergers are for two companies in the same line of business, so this merge is unusual but highly beneficial in my opinion. Here’s why:

Combining a physical storefront with an insurance company (especially with this merger) will mean that the middleman (what CVS would be previously) would be eliminated when consumers buy goods. According to The Economist, CVS is the nation’s largest PBM (pharmacy benefit manager) – a fancy way of saying that CVS is America’s largest prescription drug store chain. PBMs are also middlemen who haggle for cheaper prices from the manufacturer so they can sell drugs at a cheaper price. This merger proves to be beneficial because when somebody is prescribed a drug, they often use their insurance to deduct some of the cost. The merger company means that now there is a more direct line from Aetna insurance to CVS products, extinguishing other third-party additional fees and providing what will hopefully be a cheaper way to get prescriptions.

This sounds appealing, but the idea is hardly new. United Healthcare, which according to the LA Times is the nation’s largest insurer, acquired the smaller chain Optum. The result was Optum RX, which the CVS-Aetna merger is closely mirroring. However, Optum RX is relatively small and obscure to the general public, which may be a reason why most people haven’t heard of it. CVS+Aetna will work because it provides a much more convenient and mainstream alternative to Optum RX, taking United Healthcare out of its monopoly on one-stop insured prescription drugs. If United Healthcare tries to expand Optum RX to compete with CVS-Aetna, the result is lower costs, because direct competition almost always leads to cheaper prices.

A final reason this merger is beneficial in the long run is that the combined companies can slow Amazon’s ventures into the pharmaceutical industry (which, according to CNN, is worth 560 billion dollars). Amazon has already secured permits in more than 12 states to build prescription drugstores. Assuming Amazon succeeds, physical drugstores will find themselves at a massive disadvantage to Amazon’s mostly electronic storefront. Therefore, the CVS-Aetna merger will help keep the pharmaceutical industry afloat while Amazon threatens to tear it all down.

Americans’ dependence on prescription drugs and healthcare could give the CVS-Aetna merger a great advantage. We no longer need to eat that apple to stay healthy.

David:)

– Originally published on the Town Crier (SHS Student-Run Newspaper) on November 30, 2017.




Apple

 

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