Two Major Companies Have Big Plans To Change The US Health Care Market

Evie Fordham | Politics and Health Care Reporter
  • CVS acquired major health insurance company Aetna Wednesday in a move that could shake up health care.
  • Amazon is planning a joint health care venture with other power players.
  • The companies want to eliminate middlemen and inefficiency to change how patients get health care.

Major changes in American health care could be on the horizon as corporate giants CVS Pharmacy and Amazon invest in their own new business models to disrupt the health care market, author and health care consultant Rita Numerof told The Daily Caller News Foundation.

“It’s important that health systems accelerate their own efforts to adopt a more retail model, one that includes transparency … and offers their consumers real choice,” Numerof told TheDCNF via telephone Wednesday. “They’ve got to answer the question, ‘Why should you get care at my facility?'”

Antitrust officials approved CVS for its $69 billion acquisition of health insurance company Aetna Wednesday. Amazon announced it was launching a health care venture led by surgeon and author Atul Gawande on Jan. 30, fueling rampant speculation about how Amazon CEO Jeff Bezos would turn U.S. health care upside down.

These companies want to redesign how Americans get health care — and who they get it from — as many members of the U.S. working class watch their health care premiums and deductibles rise. The average cost of employer health coverage offered to workers has increased to nearly $20,000 for a family plan in 2018, reported The Wall Street Journal on Oct. 3.

Much is unknown about Amazon’s unnamed joint health care venture with J.P. Morgan and Warren Buffett’s Berkshire Hathaway.

Rita Numerof is co-founder of health care consulting firm Numerof & Associates. Courtesy Numerof & Associates

Rita Numerof is co-founder of health care consulting firm Numerof & Associates. Courtesy Numerof & Associates

“Those organizations have the muscle, the IT infrastructure and the financial reserves to be able to really make a difference and start on creating models to improve the experience of their own employees,” Numerof told TheDCNF. “My expectation is that they will take that more broadly to market. I think that they already have been a real disruptive force.”

Amazon, for example, announced that it was buying prescription drug delivery company PillPack in June, causing a “wave” of people with stock in drug distributors like McKesson, Cardinal Health and even CVS to sell shares, reported CNBC.

“Jeff Bezos is not in this business from an altruistic standpoint,” Numerof told TheDCNF.

The Amazon health care venture will try to address systemic flaws like inefficient middlemen, poor primary care and high costs, according to Gawande.

“You can’t achieve coverage if you aren’t also addressing the waste in the system … being able to address how we get more value out of what we put in and make it a better experience of care and coverage for people as well,” he at the Aspen Ideas Festival in June.

Meanwhile, CVS wants to expand the types of health care it offers after purchasing Aetna, which is the third-largest health insurance company in the U.S., according to The Washington Post. The health insurer has over 22 million medical members, reported WaPo. CVS has nearly 10,000 retail locations. (RELATED: Senate Democrats Think They Have A ‘Gotcha’ Moment For Republicans On Health Care Ahead Of Midterms)

CVS’s “retail pharmacy business” already serves 5 million customers per day, according to WaPo. The Aetna deal could give CVS “more leverage in its negotiations with drugmakers over drug prices,” reported WaPo.

A pedestrian walks by a CVS Pharmacy on December 4, 2017 in San Francisco, California. Photo by Justin Sullivan/Getty Images

A pedestrian walks by a CVS Pharmacy on December 4, 2017 in San Francisco, California.
Photo by Justin Sullivan/Getty Images

“It’s interesting as we look at the potential role of CVS’s large and growing clinical services footprint, which they’ve invested in for many years,” Numerof told TheDCNF. “Aetna can steer patients to CVS pharmacies and their MinuteClinics.”

“The merger can make expanded CVS services in-network, which means lower costs and a lower copay for consumers or patients,” she continued. “This puts an additional pressure on conventional health systems to lower the costs of outpatient services.”

These investments by CVS and Amazon represent a big difference from the hospital and health care system mergers that were being touted as cost-saving a few years ago, Numerof said.

Other companies are following suit. CVS competitor Walgreens announced Wednesday that it’s partnering with major diagnostic testing firm LabCorp to open approximately 600 patient service centers at Walgreens locations, according to Forbes. (RELATED: CVS Is Buying One Of The Largest Health Insurance Companies In A Deal That Could Change Health Care In The US)

“This is another wake-up call to those constituents in the industry that have either attempted to hide their heads in the sand or have been moving forward into the future with their foot on the brakes,” Numerof told TheDCNF.

Numerof is the co-author with Michael Abrams of the 2016 book “Bringing Value to Healthcare: Practical Steps for Getting to a Market-Based Model.” Numerof and Abrams co-founded the health care consulting firm Numerof and Associates.

Neither Amazon nor CVS immediately returned a request for comment.

Follow Evie on Twitter @eviefordham.

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