How much does it cost to go toe-to-toe with Amazon in a ring that the online giant hasn’t even stepped into yet? If news of a possible merger between CVS and Aetna is any indicator, then it’s north of $240 billion dollars in combined annual revenue. According to an Oct. 27, 2017 report from Marketplace and American Public Media, the drug store chain and insurance company are in talks to join forces and weather any possible storm that Amazon could stir if it were to enter the prescription drug market. The latter is certainly a possibility, as the report notes that Amazon in recent years had a stake in an ill-fated company called drugstore.com. According to Todd Katz, Quest Integrity’s former chief financial officer, such a merger is a wise preventative measure when remaining competitive is essential to survival in the modern marketplace.
Per the Marketplace article, CVS is considering a $66 billion deal to purchase Aetna. The insurance company, which is valued at $63 billion, would theoretically provide millions of customers to CVS if the deal goes through. However, the article notes that the possible merger would need to get the approval of federal regulators, and similar medical mergers have been shot down in recent years. What does this all have to do with Amazon? A good question, says Todd Katz, formerly of Quest Integrity. The online retail and shipping company recently picked up Whole Foods in its search for continued growth, and there’s no reason why it couldn’t become a major player in the medical market, as well. Katz, who advised numerous companies on mergers and acquisitions in previous roles at major Wall Street firms, says that a move between two entities as large as CVS and Aetna shows how much of a threat Amazon poses.
According to the article, Amazon’s entry into pharmaceuticals has been a topic of discussion despite there being no hard proof that it’s going to happen. “So now that Amazon is as big as it is and has as much influence as it [has], it has the resources to potentially build out a pharmaceutical business,” Sucharita Mulpuru, a Forrester Research analyst, told Marketplace.
While with Quest Integrity, Todd Katz oversaw a period of record growth for the pipeline inspection company. For example, the company’s revenue in 2016 was $75 million and its worldwide employee count totaled 285 at the time of his exit. With such gains on his side, Katz knows what it takes for a company to buckle down and start turning major profits. In the case of CVS and Aetna, it could be a multi-billion dollar merger and Katz says that these are the types of maneuvers that companies must make to remain competitive.