The CVS - Caremark deal - why?
Retail pharmacy chain CVS is buying pharmacy benefit manager Caremark in a deal that will create a really big vertically integrated drug company.
Here's what is behind the deal.
CVS wants more control over its customer base, and with more and more consumers buying their drugs through PBMs, they get more control by creating the industry's biggest PBM. As I've noted before, the market power of PBMs will only increase as Part D becomes the primary force driving retail drug purchasing behavior.
CVS decided that rather than be at the end of the supply chain, it had to move up if it was to control its destiny.
The Wal-Mart $4 program is NOT what is driving this. nor is it responsible for increased health care costs, decreased health care costs, glacial melting, the drop in real estate prices, the Steelers' offensive line problems, or changes in consumer behavior in Kazakhstan.
Although to read some analysts, you might think it was...
The proposed deal has already created a lot of concern, but not amongst regulators or other PBMs; the companies' shareholders seem nonplussed, as stock prices for both firms have dropped since the announcement.
Comments
HA! I didn't even think about the Borat/Kazakhstan angle!
Two posts on my blog about this deal:
http://drugchannels.blogspot.com/2006/11/cvs-caremark-i-called-it.html
http://drugchannels.blogspot.com/2006/11/consolidation-of-us-pharmaceutical.html
Adam
Posted by: Adam J. Fein | November 2, 2006 9:48 AM