Examining Potential Side Effects of a CVS/Aetna Merger

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Philip Powell is associate dean of academic programs at the Indiana University Kelley School of Business in Indianapolis Philip Powell is associate dean of academic programs at the Indiana University Kelley School of Business in Indianapolis
INDIANAPOLIS -

The private sector and academia are weighing in on a proposed $69 billion merger between CVS Health Corp. (NYSE: CVS) and Aetna Inc. (NYSE: AET). Indianapolis-based OurHealth co-founder and Chief Executive Officer Ben Evans says the deal is characteristic of "this impending collision of insurers and providers," where insurers and health care providers are competing for the patient. Philip Powell is associate dean of academic programs at the Indiana University Kelley School of Business in Indianapolis and he teaches in the Business of Medicine Physician MBA program. He says the planned union of CVS and Aetna is good news for Hoosiers.

"Our health care system is fragmented," Powell tells Inside INdiana Business Multimedia Journalist Mary-Rachel Redman. "You can bring medicine, insurance, and actually, health care delivery under the same roof" with a merger of this magnitude. He calls the deal atypical and believes it "could only be good for Hoosier consumers," because the companies aren't competitors, and thus, will find ways to lower costs. "Our health care system is in need of a lot of disruptive changes," Powell says. "Something has to give and one of the best things that can happen is for different parts of the industries to come together in a new model for how to deliver services. That can only be good for Hoosiers."

Evans says there is plenty of available capital in the space and "chaos," a recipe which he says is opening the doors for big players to take shots at new opportunities in the multi-trillion dollar industry. Twenty percent -- or $3.2 trillion -- of the nation's Gross Domestic Product in 2017, Evans says, goes toward health care. He says the figure is expected to rise to $5.2 trillion by 2025. "There's chaos and chaos breeds opportunity, and you'll see the big players in health care try to leverage that chaos into opportunity," Evans told Inside INdiana Business.

The deal would also include CVS's assumption of some $77 billion in Aetna debt. You can read more about the planned acquisition by clicking here.

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