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CVS Health, America’s biggest drugstore chain, is set to acquire the healthcare insurer Aetna for about $68bn, in a deal that will create a new giant in the prescription drugs industry and is likely to spark further consolidation in the sector.

Aetna, the third-largest health insurer in the US by sales, will be offered around $207 per share in cash and stock, according to people familiar with the matter. An announcement could come as soon as Sunday evening, they added. 

The combination, which would shake up the US prescription drugs business, is seen as a defensive move by incumbents before the speculated entry of Amazon, the e-commerce behemoth, into the pharmacy business. 

In the past few months Amazon has received wholesale licenses with US state pharmacy boards, prompting rumours that the retail giant could start selling prescription drugs via its powerful online platform. 

Aetna was forced to end its $37bn takeover agreement with rival Humana last year after its deal was blocked by regulators who said it would hurt competition and consumers. For similar reason, the Department of Justice also blocked the $54bn merger between Anthem and Cigna

Analyst speculate that Humana, Anthem and Cigna are likely to explore a merger with large retailers as they seek to fight rising drug prices and ballooning costs related to the Affordable Care Act.

Large US retailers such as Walgreens and Walmart are viewed as potential suitors of these health insurers, according to analysts and bankers in the sector. Several large retailers have held informal talks with health insurers in recent weeks, according to multiple advisers, as they too are preparing for the entry of Amazon into the pharmacy sector. 

The CVS-Aetna combination would give the newly formed company better leverage in striking deals with drugmakers, analysts say. CVS, in addition to its 10,000 pharmacy stores, operates a pharmacy benefits management business (PBM), that negotiates prices for medicines with big pharma groups. 

The deal would “diversify CVS profit streams ahead of an Amazon entry and set the stage for a new healthcare-retail delivery model,” said Ricky Goldwaser, analyst at Morgan Stanley. 

The combination of a vast drugstore chain with an insurer would be the first for the industry and although it will not consolidate either sector the deal is still likely to receive close scrutiny from antitrust regulators.

The Department of Justice has increasingly become sceptical of so-called vertical deals as they fear that a buyer may use its distribution power at one stage of the value chain to gain leverage in other stages; for example, by excluding competitors offering a similar service to the company they acquired. 

CVS is working with bankers at Evercore Partners and Barclays, while Aetna is working with Lazard.

Reuters first reported that CVS was likely to offer around $207 per share.

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