Talking New Media

CVS to buy Aetna in $69 billion deal; Quebec moves to shore up newspaper industry in province

Morning Brief: Giant pharmacy company looks to transform US health care industry at a time when the Affordable Care Act is under attack, and when the Democrats control none of the three branches of government

For the past few weeks TNM has argued that the repealing of media ownership rules may not be the big boom that the industry trade associations say it will be, as giant media companies swallow up small and medium sized outlets in order to shut them down or absorb them into their networks. The Trump administration’s efforts to eliminate any barriers to corporate consolidation will, now doubt, reshape the business landscape in the US, making it more similar to what is seen in Japan… or Russia.

Now, it appears the health care industry is in for the same sort of consolidation and reshaping.

On Sunday, CVS Health said it would acquire the health care benefits company Aetna in a deal valued at approximately $69 billion. The deal, the two companies said, would reduce costs for consumers immediately, a claim that sounds more like a sales pitch than an actual promise.

The first thought is that this is a massive bet that the Democrats never regain power and go for single payer as it would make the deal a massive mistake. But in the world where we look to be heading, it is consistent with the idea that consumers have little power to make choices, whether that is regarding your health care, or how you get access to the web or television.

The New York Times, Michael J. de la Merced and Reed Abelson:

CVS to Buy Aetna for $69 Billion in a Deal That May Reshape the Health Industry

The merger comes at a time of turbulent transformation in health care. Insurers, hospitals and pharmacy companies are bracing for a possible disruption in government programs like Medicare as a result of the Republicans’ plan to cut taxes. Congress remains at an impasse over the future of the Affordable Care Act, while employers and consumers are struggling under the weight of rising medical costs, including the soaring price of prescription drugs. And rapid changes in technology have raised the specter of new competitors — most notably Amazon.

A combined CVS-Aetna could position itself as a formidable figure in this changing landscape. Together, the companies touch most of the basic health services that people regularly use, providing an opportunity to benefit consumers. CVS operates a chain of pharmacies and retail clinics that could be used by Aetna to provide care directly to patients, while the merged company could be better able to offer employers one-stop shopping for health insurance for their workers.

But critics worry that customers could also find their choices sharply limited. The deal risks leaving patients with less choice of where to get care or fill a prescription if those with Aetna insurance are forced to go to CVS for much of their care.

CNBC, Reuters:

CVS-Aetna deal will change the way many big employers buy employee health-care benefits

CVS and Aetna argue that their deal will lower healthcare costs for employees of their large corporate customers, giving the company greater clout to negotiate down drug prices and better manage the use of those medicines.

“It’s the lower overall cost of therapy. It’s not just the drugs. It’s not just the PBM (prescription benefit manager). It’s the overall outcome for the patient,” Aetna CEO Mark Bertolini told Reuters in an interview.

But employers are expected to scrutinize that kind of claim closely, according to benefit consultants in touch with hundreds of large employers.

The fallout from the Postmedia-Torstar newspaper swap deal in Canada continues.

If you recall, the two newspaper companies swapped community newspaper properties, then immediately announced that most of the papers would be closed, a major blow for local journalism.

Now, the Quebec government says it will assist local papers in the province. The province will be an interesting test case as one paper, La Presse, has already gone digital-only on all days but Saturday, relying on the web and its tablet app to reach readers.

It is an interesting response to what is unquestionably a difficult moment for the Canadian newspaper industry, the response from government up north is in stark contrast to what politicians south of the border have been advocating. While one nation looks to preserve its free press, another wants to gone, claiming it is a purveyor of ‘fake news’.


Help coming for Quebec’s newspaper industry from provincial government

The Quebec government will announce on Monday details of its $36 million plan to support the province’s beleaguered newspaper industry.

The funding announcement comes after Torstar Corp. and Postmedia Network Inc. said last week they will cut nearly 300 jobs and close more than 30 newspapers across the country, many of them in Ontario… Quebec already allotted, in its 2017 budget, $24 million over five years to assist newspapers transition to digital publishing. A further $12 million was allocated to reduce what newspapers pay into municipal recycling programs.

Rabble, John Miller:

Newspapers march further down their road to oblivion

When the history of Canadian newspapers (or, more likely, their obituary) is written, this may go down as the week we heard the first death rattles…

…Three hundred jobs went down the drain to achieve what John Boynton, CEO of Torstar, described as “increased, geographic synergies.” That’s corporate weasel language that really means Torstar and Postmedia traded and closed those papers to give them monopolies for advertising in their chosen areas of Ontario.

Monopolies are good for business (Postmedia shares tripled on the stock market overnight) but readers were the losers.

HuffPost, Jerry Dias:

It Was A Brutal Week For Newspapers. It Doesn’t Need To Happen Again

There are several options for action that the federal government could take. A report by the Public Policy Forum called for a sales tax on foreign companies selling digital subscriptions in Canada and a $400-million fund to help finance reliable news and information.

Unifor has called for the same tax rules to apply to advertisers purchasing digital media space as traditional media, generating between $800 million and $1.4 billion by 2020 that could help support journalism, among other recommendations. The House of Commons heritage committee made several recommendations last June, including a five-year tax credit to compensate print outlets for a portion of digital investments.

These are just a few of the options before Joly right now. Somewhere among them, or perhaps a combination of these and other ideas, lies a way forward.