- Healthcare companies are starting to look a lot different as mergers and acquisitions pair up different parts of the business.
- In the past few months, CVS Health has struck a deal with Aetna, while Cigna has agreed to acquire the pharmacy benefit manager Express Scripts in a $67 billion deal.
- Among the major healthcare companies, Walgreens has not gotten in on the action — yet.
The US’s largest standalone pharmacy benefit manager, Express Scripts, has agreed to be sold to Cigna.
The $67 billion deal is part of a movement that’s blurring the lines of what constitutes a healthcare company. Instead of growing by acquiring other companies in the same business, some have started to move into new lines of business.
Now, all eyes are on Walgreens.
Apart from some takeover talks with the drug wholesaler AmerisourceBergen that have reportedly fizzled out, the retail pharmacy giant has been on the sidelines as these new combinations have started to form.
“It kind of seems like the next move’s theirs to make,” said Michael Rea, the CEO of Rx Savings Solutions, which works with consumers and employers paying for healthcare to help them understand their drug prices.
It’s anyone’s guess what strategy Walgreens will take, but one thing is clear: The market Walgreens operates within is changing, and it’ll need to do something to keep up.
Analysts at Mizuho Bank speculated that Walgreens was taking a “wait-and-see approach” but hoped it wouldn’t last.
“Hopefully, the company does not wait too long to make a strategic move, given the changing competitive dynamics,” they said.
In the past few years, healthcare companies have started incorporating more businesses under one roof.
If you think about the traditional pharmaceutical supply chain, there are drug companies, drug wholesalers, pharmacies, PBMs, and health insurers responsible for paying for a medication alongside the patient.
But with deals like CVS Health’s acquisition of Aetna, some companies have started to oversee as many as three pieces of that chain, giving them more control over healthcare spending.
Overall, analysts say the trend of companies acquiring more businesses within healthcare isn’t going anywhere.
“We’re going to see a lot more vertical integration happening,” Gurpreet Singh, a partner and US health services leader at PwC, told Business Insider.
“And it’s not just in the payor space,” Singh said — deals like the one between the pharmaceutical giant Roche and the cancer technology company Flatiron Health suggest there’s room for diagnostics companies and drug companies to get into the vertical spirit as well.
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