Yesterday’s report by the Wall Street Journal that CVS Health was “in talks” to buy health insurer Aetna sent ripples through much of the healthcare realm. The combination of CVS Health, the seventh-biggest company in the U.S. by revenue, with Aetna (No. 43 on the Fortune 500) would, if it were to go through, create a corporate behemoth with $240 billion in annual revenue across a wide swath of the healthcare continuum, from retail pharmacy and benefit management to insurance.
As a rule, any creation of a new behemoth generates buzz. But this time, there has been equally breathless talk about why—Why, that is, CVS would offer what, presumably, would be a jaw-dropping $13 billion premium for Aetna’s stock? (The reported $200-a-share offer would have been roughly $40 bucks above Aetna’s closing share price on Wednesday, before word of the potential deal leaked out on Thursday, sending Aetna’s stock due north. On June 30, according to the insurer’s latest 10-Q, the company had 332 million shares outstanding.)
For the answer, all eyes turned to that other buzz-worthy behemoth, Amazon.com, which has given signs it’s moving into CVS Health’s pharmacy territory. Those rumors got more weight after the St. Louis Post-Dispatch reported that “The Everything Store” had applied for and received wholesale pharmacy licenses in at least 12 states.
Others pointed to more fundamental concerns of competition, suggesting that CVS Health needed Aetna (or something like it) to better compete with UnitedHealth Group, which has both a managed care organization (MCO) and a pharmacy benefit manager (PBM) under the same roof. Indeed, the Oracle of Delphi award ought to go to Robert Flynn, a principal at Fuld & Company, who spelled out back in June “Six Reasons Why CVS Health Should Acquire Aetna . . . Soon.” (Reading the post now, in hindsight, it’s actually pretty brilliant.)
But the purported offer got me thinking not about the why but about the who—particularly, about the leader of the sought-after company, Aetna CEO Mark Bertolini.
Bertolini has figured out a clever way of rewarding shareholders. And that’s largely by focusing on the wellbeing of his employees. Witness one high-profile move the CEO made two and a half years ago, when Bertolini announced at the annual JPMorgan health confab that Aetna would substantially raise the minimum wage of its U.S. employees and also help offset worker healthcare costs.
Though, at the time, others scoffed at the largesse, Aetna’s shareholders have benefitted remarkably. Since that announcement in January of 2015, Aetna has returned an annualized 29% to its stockholders including dividends, compared with 11.1% for the S&P 500. Shareholders who held stock on the date of Bertolini’s announcement and still hold it today have seen the value of their original stake more than double (compared with the more modest 34% gain for the S&P 500 during the same period).