CVS Health shares fell about 6 percent Friday after news broke of its talks to acquire health insurance provider Aetna for $66 billion. But analysts say the drop could be more related to Amazon entering the health-care space, than to pre-acquisition arbitrage.
"There is something in play today with Amazon. All that risk, discussion about Amazon going into the pharmacy space. That's putting a lot of pressure today on the whole drug supply chain," Jeffries analyst Brian Tanquilut said on CNBC's Power Lunch.
Shares for an acquiring company, like CVS, typically fall before a merger for a number of reasons. The company may take on debt, struggle to culturally integrate or pay a premium for shares. But shortly after news broke of the potential acquisition Thursday, CVS stocks rebounded, suggesting investors supported the idea.
"They are under pressure in their retail business, they are under pressure in their retail pharmacy business and they are under pressure in their [pharmacy benefit manager] business, so the need to diversify is pretty important," Richard Barasch, former CEO of Universal American said. In 2011, CVS bought Universal American's Medicare prescription drug business for $1.25 billion.
In an industry where standalone businesses are diminishing, analysts and investors seem to agree that the potential partnership between CVS and Aetna would secure the companies a place in the future health space. Diversifying could steel the Rhode Island-based pharmacy against United Health Care, which has data analytics, pharmacy benefits and physician groups at their disposal.
But Amazon poses new unknowns for the healthcare industry.
"They're terrific at mail order. They are great at distribution," Barasch said, describing Amazon.
Experts anticipate it could take the internet commerce company about a decade to even get 10 percent market share, but the market still reacted. CVS shares were trading in tandem with Walgreens Friday afternoon.