CVS nears deal to buy Oak Street Health for $10.5 billion: Report

Yahoo Finance Live anchors discuss reports that CVS is close to acquiring Oak Street Health.

Video transcript

BRIAN SOZZI: Let's check in on some Yahoo Finance trending tickers here starting with CVS, as the company is reportedly closing in on a deal to acquire primary care center operator, Oak Street Health, for over $10 billion. And CVS just looks like it just wants to gobble up so many of these locations. At what point do the regulators step in here and say, hey, what? CVS is going to have all of our health data essentially?

JULIE HYMAN: Well, I mean, because it's sort of horizontal integration-- I guess, in other words, it's getting into different-- let me back up. The primary care business is still very, very fragmented across the United States. So maybe at some point, yes, regulators are going to step in. But CVS is not the only one. Amazon is trying to do this as well with One Medical, although the FTC is reportedly looking at that deal.

So maybe yes, we will see regulators step in. But I've just been fascinated by this trend recently of other kinds of integrated healthcare companies getting into the doctor business. It's a sort of a strange turn of events.

BRAD SMITH: I think what's remarkable about this for CVS is that not only would you have the ability for management of some of the different kind of healthcare insurance plans that we know, of course, the CVS, Aetna deal that had taken place back in 2017, 2018, and how that's set them up to fuse together the pharmacy side of the business with the insurance side of the business.

And then you go forward even further from here. It's all of these primary care centers, to your point, Julie, that have been getting even more of the looks. Amazon's acquisition of PillPack was no coincidence, I should say, because that set them up similar to combining a pharmacy, then, later on with another type of primary care play with the One Medical acquisition there that's getting some holes poked in it as well.

But I think at the end of the day, this $39 per share equity and debt type of deal that we're seeing for CVS just further some of the debt, the attention's not just to manage the data, but hopefully to add further of a vertical integration and a seamless experience for end consumers around this because the healthcare system is so siloed in many different respects. And if we're able to see some entities start to bring that together and make sure that it's not harming some of the competitive landscape as well in the process, I would say that that's good for consumers, as long as pricing does not skyrocket higher.

JULIE HYMAN: Well, hopefully, the opposite will happen.

BRAD SMITH: Right.

JULIE HYMAN: I mean, Amazon is known for value, right? Known for trying to keep prices down, sometimes at the expense of margins. So will this be something-- and my guess is this is what the acquirers will argue-- they can actually bring down costs for consumers and for insurers.

Whether that's the case, I think remains to be seen. I mean, listen, if I'm CVS and I own Aetna, and I'm also providing care, don't I want costs to be low for Aetna? The problem is also if you are sacrificing quality of care, if you are trying to save costs by saying no to covering certain things. I mean, so it's all-- I don't know. I want to talk-- I feel like I need to talk to Meghan Fitzgerald about all of this, who's a frequent guest on the show.

BRIAN SOZZI: Well, speaking of silos--

JULIE HYMAN: She knows a lot about this, so.

BRIAN SOZZI: Yeah, absolutely. I mean, well, speaking of silos, I walk into a CVS store, these thousands of stores-- and now they're also in Target-- there's no clear indication they even own Aetna. So if they go out and buy this asset, when do they really start integrating it into the store experience? I would argue they have not done a good job of that. And of course, reached out to CVS for comment on this deal. They did not return our request for comment.

BRAD SMITH: Yeah, I think that was part of the strategary-- strategy-- strategic-- excuse me-- at the outset of that acquisition. They had said kind of early on I think a few years back that they were still going to let Aetna be a standalone. But again, I think it is smart for them, to your point, to start to fuse together the two brands a little bit more, at least let the common consumer know that there is this conjunction and an effort to hopefully add more of the ability for them to engage and kind of decide what pricing strategy works best for the household level, too.

BRIAN SOZZI: Yeah, someday, I guess you'll be able to walk into a CVS. And if you buy a chocolate bar, you'll get an alert on your phone saying, eh, you're on Aetna. You may want to put that chocolate bar down, folks.

JULIE HYMAN: Right, you get diabetes.

BRIAN SOZZI: Not good for your cholesterol.

JULIE HYMAN: They know everything.

BRIAN SOZZI: Yeah. Put that bar down.