The takeover comes as Amazon threatens to enter the drug industry. The retail juggernaut has held preliminary talks with makers of generic drugs about its potential entry into the pharmacy space, according to people familiar with the discussions.
With Amazon as a pharmacy competitor, CVS risks losing the key draw to its stores. Shoppers can already find CVS's cosmetic and household staples in other retailers and online, often for cheaper.
CVS, which has a network of nearly 10,000 pharmacies and over 1,000 walk-in clinics, plans to use its vast retail footprint as a center for pharmacy, nutrition, clinical, vision and even beauty services. They will still sell traditional household goods.
The two will thus create a new touch point outside the costly hospital emergency room visits that insurance companies must pay for. They will add new reason to visit CVS stores.
By tying up with Aetna, CVS cements the move into health care it has been making since its acquisition of the Caremark PBM business in 2007. (A PBM typically is a third party that negotiates prescription drug benefits for a commercial health plan.)
The acquisition gives CVS more scale to bargain for better prices for the prescription drugs it sells through its PBM business. It also fortifies Aetna's insurance business by creating the ability to offer its customers cheaper co-payments, presumably only in CVS stores.
It would also provide a tighter hold on patients who require more expensive, specialty drugs — the more profitable part of the business.
"These high complex-care cost members, the very, very sick, or the ones that are using expensive drugs, tend to be the highest profit for the industry," said Pramod John, CEO of Vivio Health, a specialty pharmacy management firm.