Glaxo, Reckitt Submit Only Bids for Pfizer’s Consumer Unit

GlaxoSmithKline Plc and Reckitt Benckiser Group Plc are the only companies to have submitted non-binding bids for Pfizer Inc.’s consumer business after rival candidates walked away, according to people familiar with the matter.

Pfizer plans to open a data room for Glaxo and Reckitt to start due diligence on the assets before submitting final offers in the next few weeks, the people said, asking not to be identified because the matter is private. French drugmaker Sanofi, Switzerland’s Nestle SA and health care giant Johnson & Johnson were among companies to consider and then decide against bidding for the business, the people said.

The deadline for non-binding offers for the business, which makes well-known brands including the pain reliever Advil, ChapStick lip balm and the dietary supplement Centrum, was Feb. 1, the people said. The unit could fetch $15 billion to $20 billion, people familiar with the matter have said. Potential buyers have expressed concerns about stagnant sales at the division as well as the challenge from online competitors such as Amazon.com Inc, the people said.

Representatives for Glaxo and Reckitt declined to comment. A Sanofi spokesman also said he had no comment. A spokeswoman for Nestle wasn’t immediately available to comment. A spokesman for J&J confirmed that the company had withdrawn from the bidding process and declined to comment further.

A spokeswoman for Pfizer said the company is continuing to evaluate a range of options for its consumer healthcare business, including a full or partial separation from Pfizer through a spin-off, sale or other transaction, and it may still opt to keep the business. The company expects to reach a decision in 2018, she said.

Pfizer first announced a review of the business in October. A sale would help the U.S. drug giant raise billions of dollars in cash for acquisitions and streamline operations to focus on other growth areas.

Sales at the consumer-products business were little changed in the fourth quarter from a year earlier at $950 million. Full-year sales at the unit advanced by 2 percent to $3.47 billion.

Glaxo Chief Executive Officer Emma Walmsley said at a conference in San Francisco last month that the company’s top priority is the pharmaceutical business and that it doesn’t need the Pfizer assets though the unit would be complementary.

    Read more: https://www.bloomberg.com/news/articles/2018-02-03/glaxo-reckitt-are-said-only-bidders-for-pfizer-s-consumer-unit

    Amazon, Berkshire, JPMorgan Link Up to Form New Health-Care Company

    It’s no secret Jeff Bezos has been looking to crack health care. But no one expected him to pull in Warren Buffett and Jamie Dimon, too.

    News Tuesday that Bezos’s Amazon.com Inc., Buffett’s Berkshire Hathaway Inc. and JPMorgan Chase & Co., led by Dimon, plan to join forces to change how health care is provided to their combined 1 million U.S. employees sent shock waves through the health-care industry.

    The plan, while in early stages and focused solely on the three giants’ staff for now, seems almost certain to set its sights on disrupting the broader industry. It’s the first big move by Amazon in the sector after months of speculation that the internet behemoth might make an entry. The Amazon-Berkshire-JPMorgan collaboration will likely pressure profits for middlemen in the health-care supply chain.

    Details were scant in a short joint statement on Tuesday. The three companies said they plan to set up a new independent company “that is free from profit-making incentives and constraints.”

    It was enough to sink health-care stocks. Express Scripts Holding Co. and CVS Health Corp., which manage pharmacy benefits, slumped 6.9 percent and 4.9 percent, respectively. Health insurers such as Cigna Corp. and Anthem Inc. and biotechnology companies also dropped.

    The group announced the news in the very early stages because it plans to hire a CEO and start partnering with other organizations, according to a person familiar with the matter. The effort would be focused internally first, and the companies would bring their data and bargaining power to bear on lowering health-care costs, the person said. Potential ways to bring down costs include providing more transparency over the prices for doctor visits and lab tests, as well as by enabling direct purchasing of some medical items, the person said.

    “I’m in favor of anything that helps move the markets a bit, incentivizes competition and puts pressure on the big insurance carriers,” said Ashraf Shehata, a partner in KPMG LLP’s health care and life sciences advisory practice in the U.S. “An employer coalition can do a lot of things. You can encourage reimbursement models and provide incentives for the use of technology.”

    “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort,” Bezos said in the statement. “Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”

    The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable costs. In the statement, JPMorgan CEO Dimon said the initiative could ultimately expand beyond the three companies.

    “Our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he said.

    HTA Alliance

    Amazon, Berkshire and JPMorgan are among the largest private employers in the U.S. And they’re among the most valuable, with a combined market capitalization of $1.6 trillion, according to data compiled by Bloomberg.

    This isn’t the first time big companies have teamed up in an effort to tackle health-care costs. International Business Machines Corp., Berkshire’s BNSF Railway and American Express Co. were among the founding members of the Health Transformation Alliance, which now includes about 40 big companies that want to transform health care. The group ultimately partnered with existing industry players including CVS and UnitedHealth Group Inc.’s OptumRx.

    Top Team

    The latest effort is being spearheaded by Todd Combs, who helps oversee investments at Berkshire; Marvelle Sullivan Berchtold, a managing director of JPMorgan; and Beth Galetti, a senior vice president for human resources at Amazon.

    Buffett handpicked Combs in 2010 as one of his two key stockpickers. Combs, 47, has been taking on a larger role at Berkshire in recent years, and Buffett has said that Combs and Ted Weschler, who also helps oversee investments, will eventually manage the company’s whole portfolio. Combs also joined JPMorgan’s board in 2016.

    Sullivan Berchtold joined JPMorgan in August after eight years at the Swiss pharmaceutical company Novartis AG, where she was most recently the global head of mergers and acquisitions, according to her LinkedIn profile.

    One of the highest ranking women at Amazon, Galetti has worked in human resources at the e-commerce giant since mid-2013, becoming senior vice president almost two years ago, according to her LinkedIn profile. As of late 2017 she was the only woman on Amazon’s elite S-team, a group of just over a dozen senior executives who meet regularly with Bezos, according to published reports. Previously Galetti worked in planning, engineering and operations at FedEx Express, the cargo airline of FedEx Corp. She has a degree in electrical engineering from Lehigh University and an MBA from Colorado Technical University.

    The management team, location of the headquarters and other operational details will be announced later, the companies said.

    Health-care spending was estimated to account for about 18 percent of the U.S. economy last year, far more than in other developed nations. Buffett has long bemoaned the cost of U.S. health care. Last year, he came out in favor of drastic changes in the U.S. health system, telling PBS NewsHour that government-run health care is probably the best approach and would bring down costs.

    “The ballooning costs of health care act as a hungry tapeworm on the American economy,” Buffett said in Tuesday’s statement. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”

      Read more: http://www.bloomberg.com/news/articles/2018-01-30/amazon-berkshire-jpmorgan-to-set-up-a-health-company-for-staff

      Trump Takes On Amazon Again, Urging Much More in Postage Fees

      President Donald Trump said the U.S. Postal Service should charge Amazon.com Inc. more to deliver packages, the latest in a series of public criticisms of the online retailer and its billionaire founder.

      The post office “should be charging MUCH MORE” for package delivery, the president tweeted Friday from his Mar-a-Lago estate in Florida, where he’s spending the holidays.

      “Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer?” Trump told his 45 million followers.

      Trump regularly criticizes Amazon and its chief executive officer, Jeff Bezos, who also owns the Washington Post newspaper and is currently the world’s richest man. In August, Trump accused the company of causing “great damage to tax paying retailers,” even though the internet giant began collecting sales tax on products it sells directly in April.

      As with prior missives targeting the company, Trump’s message appeared to concern investors. Amazon’s stock had gained the past three days, but dropped 0.6 percent to $1,178.68 at 12:41 p.m. in New York.

      A sudden increase in postal service rates would cost Amazon about $2.6 billion a year, according to an April report by Citigroup. That report predicted United Parcel Service Inc. and FedEx Corp. would also raise rates in response to a postal service hike.

      Amazon didn’t respond to requests for comment.

      ‘Last Mile’

      Amazon regularly uses the Postal Service to complete what’s called the “last mile” of delivery, with letter carriers dropping off packages at some 150 million residences and businesses daily. It has a network of more than 20 “sort centers” where customer packages are sorted by zip code, stacked on pallets and delivered to post offices for the final leg of delivery.

      While full details of the agreement between Amazon and the Postal Service are unknown — the mail service is independently operated and strikes confidential deals with retailers — David Vernon, an analyst at Bernstein Research who tracks the shipping industry, estimated in 2015 that the USPS handled 40 percent of Amazon’s volume the previous year. He estimated at the time that Amazon pays the Postal Service $2 per package, which is about half what it would pay UPS or FedEx.

      Both shippers were up less than 1 percent Friday. Higher postal service rates would benefit private carriers by making their rates more competitive.

      But the postal service’s losses have little to do with Amazon and more to do with its large health-care obligations and the dwindling use of first-class mail. USPS charges some of the world’s lowest stamp prices.

      The president’s tweet also assumes that Amazon would be forced to pay if the Postal Service increased its rates for packages. But Amazon has been setting up its own shipping operations in the U.S. and elsewhere in the world to minimize costs.

      For more on Trump’s Twitter storms, check out this podcast:

       

      $62 Billion Loss

      The Postal Service reported a net loss of $2.1 billion in the third quarter of 2017 and has $15 billion in outstanding debt. The service has lost $62 billion over the last decade.

      USPS’s chief financial officer, Joseph Corbett, wrote in a post for PostalReporter.com in August that the service is required by law to charge retailers at least enough to cover its delivery costs.

      “The reason we continue to attract e-commerce customers and business partners is because our customers see the value of our predictable service, enhanced visibility, and competitive pricing,” he wrote.

      He said Congress should pass provisions of legislation introduced last year by former Representative Jason Chaffetz, a Utah Republican, that would allow the postal service to raise some rates and discontinue direct delivery to business customers’ doors.

      Amazon is experimenting with a new delivery service of its own that is expected to see a broader roll-out in the coming year. Under the program, Amazon would oversee the pickup of packages from warehouses of third-party merchants and delivery to home addresses.

      Despite the occasional anti-Amazon tweet, Trump is unlikely to target Amazon with any action because the company is creating jobs by building new warehouses around the country. It’s also expected to generate 50,000 new positions with its second headquarters, said James Cakmak, analyst at Monness Crespi Hardt & Co.

      “The interests of Amazon and the administration are largely aligned – even factoring the dislocation to retail – given the positive headline potential around new job creation with fulfillment centers and HQ2,” he said.

        Read more: http://www.bloomberg.com/news/articles/2017-12-29/trump-says-u-s-post-office-should-charge-amazon-much-more

        Walgreens’s Deal Aversion Can’t Last

        CVS Health Corp. wasn't frequently mentioned on Walgreens Boots Alliance Inc.'s first quarter earnings call Thursday.

        But CVS's $69 billion deal for insurer Aetna Inc. loomed large as Walgreens reported mixed results – it beat analyst revenue estimates, but profit fell 22 percent from a year earlier due largely to an impairment charge. Shares fell as much as 6 percent percent Thursday morning.

        Like CVS, Walgreens is trying to transform itself, but without a splashy deal. But unless its more modest efforts pay dividends soon, such ambition may be pushed upon it. 

        Falling Behind

        Walgreens shares fell a good ways behind the broader market in 2017

        Source: Bloomberg

        Walgreens's pharmacy business is the key to its U.S. performance. Comparable-store pharmacy sales grew by 7.4 percent in the quarter. Retail sales fell by 0.9 percent, the sixth straight quarter of decline. The company's acquisition last summer of Rite Aid Corp. stores will help boost growth of both pharmacy and retail sales in the year to come.

        But regulatory intervention meant the Rite Aid deal was for a smaller number of stores than Walgreens hoped. And it likely marked the end of the company's ability to substantially expand its pharmacy and retail footprint in the U.S.

        Problems Up Front

        Walgreens has had a hard time growing non-pharmacy sales

        Source: Bloomberg

        Neither Walgreens nor CVS can rely on torrid prescription growth forever. And retail success will be tough to achieve in an increasingly difficult environment for everything brick-and-mortar. Amazon.com Inc., already a competitor in retail, is reportedly considering getting into the pharmacy business too. 

        CVS's deal is a bet on providing more health care and squeezing more out of its pharmacy business. It's risky; CVS could alienate Aetna customers if it's too aggressive in pushing its own services, and it may irk competing insurance companies served by its pharmacy benefit management arm. CVS will have to take on a bunch of debt, which will constrain needed investment into expanding in-store clinics. 

        But the rewards could be substantial. Aetna enrollees are a large captive market for CVS offerings. Health care is increasingly moving away from traditional points of service and toward this kind of retail setting. And the combined company will have a stronger defense against Amazon, which isn't about to open clinics or start insuring people.

        Walgreens is taking a different tack. CEO Stefano Pessina said on Thursday's call that he thinks partnerships — such as those it has with distributor AmerisourceBergen Corp. and lab-testing service Laboratory Corp. of America Holdings — are just as valuable as acquisitions.

        Meanwhile, the company is focusing on geographic diversification and revamping its stores, with pilot programs testing new approaches to everything from its supply chain to beauty offerings.

        While that approach is cheaper than an Aetna-style deal, there's arguably a ceiling on the benefits it can deliver. It's unlikely that even a radical, rapid, and flawlessly executed store redesign could do much to stop the general shift toward buying things elsewhere and online — let alone counter a more aggressive Amazon entry. 

        Don't expect Walgreens to stick to limited partnerships and internal reinvention for too much longer.

        This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

          Read more: http://www.bloomberg.com/news/articles/2018-01-04/walgreens-earnings-it-can-t-avoid-deals-forever

          Target to Buy Shipt for $550 Million in Challenge to Amazon

          Target Corp. agreed to purchase grocery-delivery startup Shipt Inc. for $550 million, stepping up its challenge to Amazon.com Inc. by speeding the rollout of same-day shipping.

          The all-cash deal will let Target customers order groceries and other goods online, and then have the items sent directly to their doors from nearby Target stores.

          Buying Shipt further beefs up Target’s logistics operations after the retailer earlier this year acquired software company Grand Junction, which also manages local and same-day deliveries. Target now offers same-day delivery in New York City and can send orders from 1,400 of its stores. Competition in this space is growing fiercer, though, as rivals Wal-Mart Stores Inc. and Best Buy Co. also offer same-day service, keeping pace with Amazon.

          Target’s decision to buy Shipt, rather than partner with it, “shows how serious they are,” Kantar Retail analyst Robin Sherk said. “One-stop shopping was convenient in the 1990s but for today’s families you have to be able to do instant food delivery as well. It’s also a realization that Amazon, this big technology disruptor, has entered the consumer landscape.”

          Four out of five shoppers want same-day shipping, according to a survey by fulfillment software maker Temando, but only half of retailers offer it.

          “With Shipt’s network of local shoppers and their current market penetration, we will move from days to hours, dramatically accelerating our ability to bring affordable same-day delivery to guests across the country,” John Mulligan, Target’s chief operating officer, said in a statement.

          The deal will give Target same-day delivery at about half of its 1,834 stores by next summer, with the number growing to a majority of stores in time for next year’s holiday season. The service — costing $99 a year for unlimited deliveries — will initially encompass categories like groceries, household essentials and electronics before expanding to all major product groups by the end of 2019.

          Improved Position

          “While it will not affect Target’s capability this holiday season, the fact that Target will have this service in place during 2018 will significantly improve its online competitive position,” Charlie O’Shea, an analyst at Moody’s Corp., said in a note.

          Target rose 2.7 percent to close at $62.67 Wednesday, while the news caused a momentary dip for the shares of Shipt’s existing retail partners, Kroger Co. and Costco Wholesale Corp. Kroger ended the day up 1.4 percent, while Costco was little changed.

          Kroger said it’s still optimistic about the company’s prospects for home delivery after expanding its logistics operations in recent years via partnerships with Instacart Inc. and others.

          “We feel really good about the variety of partnerships Kroger has going,” corporate communications head Keith Dailey said. Costco Chief Financial Officer Richard Galanti declined to comment.

          Online Preference

          Consumers’ increasing preference for shopping online, along with Amazon’s purchase of upscale grocer Whole Foods and its encroachment into new arenas like apparel, have sent retailers scrambling to improve their online offerings. E-commerce sales are up about 17 percent this holiday season, according to Adobe Systems Inc., and online merchants racked up a record $6.59 billion on Cyber Monday alone, the company found.

          The question for traditional retailers is how to handle all those internet orders. They could build their own delivery network, but it’s an arduous and expensive process. That’s why many of them are seeking help from e-commerce startups like Shipt and Instacart.

          Founded in 2014, Shipt serves about 20,000 customers through partnerships with retailers including Publix Super Markets Inc., HEB Grocery Co., Kroger and Costco. It will continue to operate independently and plans to expand its business with other retailers, Chief Executive Officer Bill Smith said in an interview.

          ‘Scale Matters’

          “We’ve spoken to a number of our existing partners about this deal and all the conversations have been very positive,” Smith said. “Having multiple retailers allows us to grow our membership base and make it more attractive. In same-day delivery, scale matters.”

          For now, Target shoppers will need to pay Shipt’s $99 annual membership fee to gain access to the service. Once a customer orders, they send a “shopper” into the store to grab the groceries, and then deliver the items. Target is working on how to integrate Shipt into its website and mobile shopping app, Mulligan said.

          The deal is expected to close before the end of the year and will be “modestly accretive” to Target’s profit in 2018, while boosting online sales, the company said. The retailer’s e-commerce sales already grew 24 percent in the third quarter.

          ‘Big Loser’

          Target has worked with Shipt’s rival Instacart for same-day service in cities like Minneapolis and Chicago since 2015, and Mulligan said he “will have conversations with them on where we go next.”

          “The big loser in this deal is Instacart,” said Cooper Smith, an analyst at business-intelligence firm L2.

          Following Target’s announcement, Instacart said it works with more than 165 retailers, including seven of the eight biggest grocers in North America.

          “As an independent company, Instacart doesn’t compete with any of our partners,” the company said. San Francisco-based Instacart has recently expanded its partnerships with retailers including Costco, Kroger, Albertsons Cos. and drugstore giant CVS Health Corp.

          Target and Shipt began discussing the deal in the middle of the summer, Mulligan said. They decided to pursue an acquisition rather than just a partnership in order to plow Target’s resources into expanding Shipt’s business, and to maintain its current level of customer experience.

          Smith will stay in his role, reporting to Mulligan, and its 270 employees will remain in Shipt’s offices in San Francisco and Birmingham, Alabama.

            Read more: http://www.bloomberg.com/news/articles/2017-12-13/target-to-buy-shipt-for-550-million-in-bet-on-same-day-delivery

            A Manager of $42 Billion Fears Bubble in World’s Biggest Stocks

            The world’s biggest companies could be hiding the biggest risks.

            That’s because companies such as Amazon.com Inc. and Alibaba Group Holding Ltd are overvalued, according to Robert Naess, who manages about $42 billion in stocks at Nordea Bank AB, Scandinavia’s largest bank.

            “I’m a bit worried about the valuation of these very popular companies,” Naess, portfolio manager, said in an interview in Oslo on Friday. “The big stocks have become more expensive. There’s danger of a bubble in them.”

            Naess and his partner, Claus Vorm, quantitatively analyze thousands of companies, investing in those with the most stable earnings and avoiding expensive stocks, a strategy which has delivered a 10 percent return for the Global Stable Equity Fund this year. It has returned 12 percent on average in the past five years, beating 75 percent of its peers.

            They prefer “boring” stocks, unlike the global behemoth technology companies that have led the global stock rally. Tech stocks sold off at the end of November, with the single worst day on record for the so-called FANG stocks. One of those stocks, Amazon, which has risen 55 percent this year, has a price-to-earnings ratio of 275 for 2017, compared with 18.2 on average for MSCI World Index.

            “Long-term, 5-10 years, stocks that are expensively priced, such as Amazon, Tencent and Alibaba, will give a low return,” Naess, who also shuns Facebook, Inc., said. “I’m pretty certain that in the next 10 years the return on those will be lower than the market.”

            The fund holds Apple Inc. and Alphabet Inc., which are “reasonably priced”. It has also bought a stake in Merck & Co., Inc. and increased in Amgen Inc., CVS Health Corporation and Walgreens Boots Alliance, Inc.

            Naess sees about 12 percent upside for the global developed stock market in the next 12 months provided companies continue to deliver expected earnings growth.

            “2018 looks OK,” he said. “Normally, I think the earnings estimates are too high. But I believe earnings estimate could be too low next year given earnings are so good this year.”

              Read more: http://www.bloomberg.com/news/articles/2017-12-11/a-manager-of-42-billion-fears-bubble-in-world-s-biggest-stocks

              CVS-Aetna Deal Could Mean End of Era in How Drugs Are Paid For

              If Aetna Inc. is eventually swallowed by CVS Health Corp., an important part of the health-care business will be changed — perhaps for good.

              For years, pharmacy benefits were largely carved out from the rest of a medical coverage plan. But increasingly the two services are being combined, a move that in theory will make it easier to verify whether expensive drugs are worth the cost. A merger of the third-biggest health insurer with the largest U.S. drugstore chain, which also operates a pharmacy-benefit management company, could speed the process.

              “You are hearing the warning for the end of the road for the classic standalone” pharmacy-benefit business, said Pratap Khedkar, managing principal at consulting firm ZS Associates.

              Drugmakers are producing more pricey treatments for cancer and rare diseases. Combining drug and medical benefits in the same place is “the only way” payers will figure out whether such expensive new drugs are actually making people better and saving money by keeping them out of the hospital, he said.

              A merger of CVS and Aetna would create a health-care behemoth and put huge pressure on standalone players such as Express Scripts Holding Co. and Walgreens Boots Alliance Inc. Express Scripts would become the last major standalone pharmacy-benefit manager not allied with a major insurer. 

              All Channels

              CVS and Aetna have held discussions about a potential deal, according to people familiar with the matter who asked not to be identified as the details aren’t public. A newly combined company would “own the entire chain, from prescribing and filling prescriptions to the health plans that pay for them,” said Michael Rea, of Rx Savings Solutions, which has an app that helps patients find lower cost drugs.

              Under a combined roof, the insurance arm of CVS-Aetna could help keep costs down by routing patients needing basic urgent care to CVS-owned walk-in clinics and keeping them out of expensive hospital emergency rooms, analyst Ann Hynes of Mizuho Securities said in a note to clients. The company would also become a formidable competitor to UnitedHealth Group Inc., the biggest health insurer and owner of its own PBM unit, OptumRx.

              But even with the new clout, a merger isn’t likely to be derailed by federal antitrust authorities, said John Briggs, an antitrust attorney at Axinn Veltrop & Harkrider in Washington.

              CVS and Aetna declined to comment.

              Walgreens, the No. 2 drugstore operator, could also feel the pressure. A CVS-Aetna marriage could cause the drugstore chain to look for its own acquisition targets, with Express Scripts being the most likely, Charles Rhyee, an analyst at Cowen & Co., wrote in a note to clients Friday.

              And then there’s Amazon.com Inc., which recently gained drug-wholesaler licenses in 14 states. The looming threat of the e-commerce behemoth entering the mail-order pharmacy business and pushing down profit margins for drug distributors, benefit managers and retail pharmacies intensifies the pressure on standalone players.

              For CVS, the move is “a natural defense against the potential threat of Amazon entering the retail pharmacy market,” Rhyee said.

              Another possibility is that Amazon could buy Express Scripts. That would give the internet retailer an instant and large foothold in both the PBM industry and the mail-order pharmacy business.

              ‘Strong’ Model

              Health insurer Anthem Inc., Express Scripts’ biggest current client, announced earlier this month that it would leave Express Scripts when its contract ends at the end of 2019 to form its own PBM unit. And Prime Therapeutics, another major player, manages drug benefits for nonprofit Blue Cross and Blue Shield plans in numerous states.

              “Our model is strong and thriving,” said Jennifer Luddy, a spokeswoman for Express Scripts. “We believe in the value that we provide to our customers as an independent PBM.”

              On an earnings call this week, Express Scripts Chief Executive Officer Tim Wentworth said he was open to a deal with Amazon to help serve cash-paying patients.

              Walgreens declined to comment.

              In terms of the CVS-Aetna deal, antitrust authorities will look closely at the competition between the companies in selling Medicare Part D plans for the elderly, said Briggs, the attorney.

              There could be fight between the Justice Department and the Federal Trade Commission, which share antitrust enforcement, over which agency will investigate the merger, according to Briggs. The Justice Department handles insurer mergers and successfully stopped the combination of Aetna and Humana Inc. this year. The FTC investigates retail pharmacy deals. In September, it cleared Walgreens’ acquisition of 1,900 Rite Aid Corp. stores after Walgreens shrank the size of the deal.

              Still, a CVS-Aetna deal would likely win approval because a number of other major players will remain in the Part D market, he said.

              “That’s an easy fix,” Briggs said. “The whole deal is not going to crater on account of Part D.”

                Read more: http://www.bloomberg.com/news/articles/2017-10-27/cvs-aetna-deal-could-mean-end-of-era-in-how-drugs-are-paid-for

                Amazon Threat Causes Shakeout in the Health-Care Industry

                Amazon.com Inc. is casting a long shadow over the health-care industry.

                The prospect of the giant Internet retailer entering the business is beginning to cause far-reaching reverberations for a range of companies, roiling the shares of drugstore chains, drug distributors and pharmacy-benefit managers, and potentially precipitating one of the biggest corporate merger deals this year.

                On Thursday, the pressure was plain to see. A report that Amazon had received pharmacy-wholesaler licenses in a dozen states triggered a fast and steep selloff that wounded the likes of McKesson Corp., AmerisourceBergen Corp. and Cardinal Health Inc. And late in the day, shares of Aetna Inc. surged after a report that it was in talks to be taken over by CVS Health Corp.

                Executives in the drug industry say that Amazon could use its expansive online reach and its logistical muscle to threaten companies that ship and sell medicines to consumers and cut pricing deals with drug makers.

                “Size and scale-wise, they can disrupt anywhere they want to disrupt,” said Chip Davis, president of the Association for Accessible Medicines, a trade group for generic medication, in an interview Thursday.

                Competitive Squeeze

                A deal for Aetna could conceivably move CVS further away from the business of brick-and-mortar retail drugstores and deeper in health services such as pharmacy benefits, where it already has a sizable presence.

                Combining Aetna and CVS would create a health-services giant and a bigger competitor for UnitedHealth Group Inc., which is the largest U.S. health insurer and has its own own clinics and a pharmacy-benefits unit.

                The presence of Amazon is already being felt by retailers and companies that sell drugs over the counter. The head of of Bayer AG’s consumer-health business said on a conference call with analysts Thursday that the wider shift to online shopping by U.S. consumers was hurting its business. Erica Mann, the division’s chief, dubbed it the “Amazon effect,” saying buyers are looking for value.

                At the same time, the pecking order in the health-supply chain is beginning to shift.

                Earlier this month, insurance giant Anthem Inc. said it was cutting ties with Express Scripts Holding Co. after a long dispute over pricing and starting its own pharmacy-benefits manager in 2020. A bulked-up CVS and Anthem’s new venture could raise the pressure on Express Scripts, which has touted its independence.

                Any tie-up of Aetna and CVS would follow a pair of failed mergers among health insurers. The deals would have reduced the ranks of big U.S. health insurers from five to three, a prospect that led the Justice Department to oppose both prospective tie-ups.

                If the Aetna deal happened, “CVS would have a dominant position” in the drug-benefits business, said Michael Rea, founder of Rx Savings Solutions, which has an app that helps patients find low cost drugs.

                Pharmacy Threat

                Analysts have speculated that Amazon could soon enter the business of selling prescription drugs, threatening to disrupt retail drugstores, drug wholesalers, and the pharmacy-benefits management business. While Amazon has never publicly commented on what its plans may be, CNBC reported this month that the Internet giant could make a decision about selling drugs online by Thanksgiving. The network didn’t name its sources.

                McKesson slid 5.2 percent at 4 p.m. in New York, while AmerisourceBergen shares fell 4.2 percent and Express Scripts sank 3.7 percent following the report on Amazon’s state licenses by the St. Louis Post-Dispatch.

                Bloomberg News confirmed that Amazon had obtained wholesale-pharmacy licenses in at least 13 states, including Nevada, Idaho, Arizona, North Dakota, Oregon, Alabama, Louisiana, New Jersey, Michigan, Connecticut, New Hampshire, Utah and Iowa. An application is pending in Maine. Some of the licenses were obtained late last year and some this year.

                Amazon declined to comment.

                The licenses could be part of Amazon’s business-to-business sales effort, which would include sales to hospitals, doctor’s offices and dentists. Amazon on Tuesday announced “Business Prime Shipping,” which brings the quick delivery associated with Amazon household orders to workplaces. 

                The Seattle company launched Amazon Business in 2015, offering tractor parts, latex gloves, file folders and millions of other products needed in factories, hospitals, schools and offices. Businesses are shifting their supply shopping online from less-efficient methods such as browsing print catalogs, faxing orders and telephoning sales representatives.

                Online business-to-business sales – a broad category that includes pens and paper for the office as well as lab equipment and parts used in factories — will grow to $1.2 trillion in 2021 from $889 billion this year, according to Forrester Research Inc.

                On a conference call Thursday with analysts, McKesson CEO John H. Hammergren said the wholesaler doesn’t “take the entry of any competitor lightly,” but said the company already has a large online order operation and similar to what Amazon does logistically. “To some extent, we were Amazon before it was cool to be Amazon.”

                  Read more: https://www.bloomberg.com/news/articles/2017-10-26/drug-wholesalers-slump-after-amazon-com-obtains-state-licenses