Vertical Integration saves money. And CVS and its competitors use that to line their pockets, not provide healthcare

I have several times referred to the concept of “vertical integration” in the health care/health insurance/pharmaceutical industry, most recently on March 28, 2026, Everything is becoming more unaffordable, but health care may lead this list!. These posts often reference the posts of former insurance executive-turned-whistleblower Wendell Potter on his substack “Health Care Un-Covered”, including “With CVS’s Vertical Empire Under Threat in Tennessee, the Company Threatens to Leave”, which discusses the fact that CVS, most widely known as large pharmacy chain, also owns the Pharmaceutical Benefit Manager (PBM) Caremark. PBMs are add-on middlemen that negotiate better rates for insurance companies with pharmacies. CVS owns pharmacies, a lot of them. This may seem like conflict of interest (COI), but that is apparently a quaintly outdated concept in this era of mega-corporations.

Actually, the PBM-pharmacy COI is only a part of the CVS megalopoly. They also own one of the nation’s largest health insurers, Aetna, so they have both ends and the middleman! And, to round it out, they own a large primary care provider group (Oak St. Health) and long-term care company (Signify Health) and urgent care provider (Minute Clinic). Just read the AI summary if you Google “Companies CVS owns”, but if you want it, the comprehensive list by the SEC is here. This is what vertical integration is; you buy from yourself, and sell to yourself, set the prices (usually in a way that minimizes tax liability), and make a lot of money. The structure is not hard to understand, but it maximizes the conflict of interest. (For a discussion of why this is conflict of interest and not “potential” conflict of interest, see this blog post from August 20 2010, The AAFP, Coca-Cola, and Ethics: Serving the public interest? . In brief, COI exists when a decider has interests in both parties, and a decision one way would help their other interest. The conflict exists whatever the decision is actually made. A judge hearing a case in which one party is a company in which they own a great deal of stock has a conflict of interest; it doesn’t require waiting to see how they rule.)

To be clear, CVS is far from the only major player in the “healthcare industry” (quotes on purpose, and emphasis on “industry”) that is vertically integrated. The largest health insurance company in the US, UnitedHealth, also owns a PBM, (OptumRx), a primary care group (Optum) and a whole host of other companies (SEC listing here). So does CIGNA (their PBM is ExpressScripts). So, there is competition within the “healthcare” sector; it is an oligopoly (few companies) not a complete monopoly. But oligopolies don’t really compete in the way classic capitalist theory would have it; rather, they tend to set prices and divide up the market so they all do well (although they would prefer the other companies to go out of business, the existence of a few tends to forestall any governmental intervention that might occur with a true monopoly).

Is vertical integration bad? A major argument in favor of it is that it can, and often does, increase efficiency. If you own everything, from insurer to care delivery system to pharmacy, and all the other players in between, you can minimize the obstruction from a piece that is owned by someone else. Things can move more smoothly. Costs can be reduced significantly. These are the arguments most commonly put forward, to the public, by vertically integrated corporations that control a huge market sector, oligopolies as well as monopolies.

It is also the argument put forward to stockholders, particularly large stockholders like private equity firms. Especially the “reduced costs” part. This is very attractive to stockholders. It could also be attractive to those ostensibly served by the “healthcare” industry, those people needing – healthcare. After all, they are heavily burdened by the cost of their healthcare, which constantly goes up. This includes the portion that they are responsible for in the form of premiums, deductibles, copayments and “cost sharing” (meaning insurance only pays a part of the bill and you’re on the hook for the rest). Another recent Potter piece, The Bill That Never Ends, summarizes the situation and addresses the fact that deductibles reset every year, so people are constantly behind the 8-ball and can never pay it off. It reminds me of the compound interest that keeps former students in debt for decades even though they may have paid off far more than the original loan! It is an example of how our laws are set up to benefit large businesses, not regular people.

Which, of course, brings us to the issue of efficiency, and lower costs. To what use is this efficiency, this lower cost, put? Cui bono? There is an argument that such efficiency could decrease the overall cost of health care to the nation, as well as to the individuals who require care, which has actually been promulgated for decades by academics and others. There are fewer of them these days, as it has been demonstrated repeatedly that such an idea is frightfully naïve. Yes, money is saved, but it is all used for greater salaries and bonuses for management and greater profits for shareholders. If it were being used to lower premiums, decrease deductibles, lower the cost of drugs, or increase the availability and affordability of health care, we would have seen it. We have not. Too bad.

A weak, but possibly useful, analogy is to a family. The adults (usually) generate the income, and certainly choose how to spend it. This can be mainly to provide food and housing, education for children, health care (to the extent that it is available) and other benefits for the family. Or it could be spent on relatively transient pleasure for the adults – alcohol, tobacco and other drugs, gambling, etc. Most of us feel that the first is better, a “good” thing, and the second is not good, is selfish, and even reprehensible. Apparently, such moral judgement is not applied to corporations, certainly not, in this case, those involved in “healthcare”.

I keep putting “healthcare” in quotes when applied to the industry. This is because it is not an industry that is at any significant level dedicated to providing healthcare to our people; when it does, this is a byproduct. It is an industry that is dedicated to extracting the most dollars possible from the rest of the economy and putting them in their own pockets. While this is, of course, the goal of most of our industries, it seems worse that “healthcare”, perhaps because of the veneer that come from ostensibly doing something good, seems to be particularly effective at it.

A single payer health insurance system only addresses coverage. A national health service, such as in Britain, is a more comprehensive manifestation of vertical integration. It doesn’t always work well, mostly because it is starved of funds as a political act to demonstrate that the public sector does not run efficiently or effectively, thus an argument to privatize it, which has to some degree been done in the UK. And, like almost all efforts to privatize formerly public services, the cost goes way up, the service does not improve or gets worse, and the money that could have been used to benefit the people is lining the pockets of ganevem. This does not seem like a good use of benefits of efficiency and decreased cost arising from vertical integration to me.

Maybe we can do something about it! Imagine if the phrase “healthcare” industry didn’t have to be in quotes!

 

For more (or maybe just more terse):

“The health insurance company gets a cut, the pharmacy benefit manager gets a cut, the drug manufacturer gets a cut, and the patient…gets screwed!” Rep Alexandria Ocasio-Cortez, interviewing CVSHealth CEO David Joyner at a congressional hearing.

Also “Federal rules require the insurer to spend a certain percent on care. But, when you own the care, when the insurer owns the pharmacy, owns the PBM, owns the drug manufacturer, you also own the health care cost.”

The whole clip is not that long and makes the point about vertical integration very clear, including 1000% markups on some drugs! Thank you, AOC!  If you have time to do nothing else, watch this video!

https://ocasio-cortez.house.gov/media/press-releases/icymi-ocasio-cortez-calls-out-cvs-healths-corporate-strategy-monopolize 

Aging, suffering, and the inevitability of death: Let's keep it real, and ignore the quacks

My friend Paul Taylor, longtime journalist and former executive at the Pew Trusts, has just published a new book called “This Is Getting Old: Two Boomers and Their Generation at Dusk”. It has two main topics. The first is an often-disturbing analysis of the impact of the “Boomer generation” as a whole, focused on their (our) massive accumulation of money, fighting for society’s resources to be directed to us, and shockingly, away from those who need it most, children. There are clearly many different indviduals in this generation, as well as subgroups (since boomers were born 1946 to 1965, the usual characterizations of us in our youth, activism in the late 1960s, obviously are only about the older part of that cohort). He makes the point that not only did this generation, as many before, get more conservative as they aged, but that only a portion of them were ever progressive. And the contrast between their generosity to their own children and grandchildren, and their parsimony toward most of society’s children is, at least coincidentally (as he states it), or definitely (as I think) about the color, race, and ethnicity of the majority of today’s children. Did I say this was shameful? If not, I do!

The other focus of the book is the aging of his, their, and our generation, focusing particularly on one couple (a terrific, impressive, warm and active couple), but also full of data on what is happening to all of us. Which is the same thing that happened to everyone before us, getting old and eventually dying. We may be dying older, and dying of different things, and (many of us) having more healthy and productive years before we die, but we all die. And for many of us, perhaps most of us, as all through history, that dying will be preceded by a period – which can be short or be many years – of suffering, of being sick, in pain, losing our mental faculties, or all of these. Guaranteed. While billionaires are being quite successful in avoiding (at least for themselves) the other of that famous pair, taxes, avoiding death is, even for them, only a science fiction cryogenic dream for them that has not yet happened. Thank goodness. If there are any people that the future does NOT need preserved for them to deal with, it is the billionaires most assiduously working on it!

So, we need to remember not only the inevitability of death, but the suffering that so often precedes it. We boomers have been watched it in our parents, our older relatives, and, sadly, many of our peers. It is well to remember the myth of Tithonus, who was granted eternal life by Zeus, but not eternal youth. He continued to age, alive and living sicker and more decrepit. A more modern self-deception: a few decades ago, I was the only physician in a health policy class. Each week one student had to make a presentation to the class on a particular topic. The student who addressed the issue of “long term care” did present data, but then added that in their opinion the need for long-term care would decrease because people were taking better care of themselves, exercising and eating better and not smoking. I pointed out that this would obviously increase the need for long-term care, as people would less often die young from heart attacks and more often live older and older (if not eternally, like Tithonus) with more and more care needs. I suspect I even said something like “if you want to decrease the need for long term care, have people smoke, drink, eat poorly, not exercise and drop dead in the 40s and 50s”.

But that student, and others, were young. Somehow, they conflated living a more healthful lifestyle, and having better health in the near and medium term, with not ever confronting getting old, sick, and dying. That is purely wishful thinking. While living more healthfully is a good idea, it cannot prevent the inevitable. And yet, many people, even today, believe this that somehow they can and (more venally and evilly) are selling it to others. Some of these ideas are commonly associated with folks like Secretary of Health and Human Services Robert F. Kennedy, Jr. (how painful to associate that name and that title!) and the MAHA (Make America Healthy Again) movement. Like the MAGA (Make America Great Again) of Donald Trump, the key point is the “again”. In the case of MAGA, it depends on what your definition of “great” is – probably America was if it means slavery, racism, subjugation of women, and constant wars, with military budgets making up the biggest part of public spending, the funding of which comes disproportionately from those with lower incomes.

In terms of MAHA, while there may be a bit less subjective flexibility about defining “healthy” than “great”, there is definite disagreement about the road to health. For example, a recent study by the Edelman Trust Barometer produced the table below. About a quarter to a third
of Americans believe each of these falsehoods, and 70% believe at least one, with a whole bunch of folks who “don’t know”. Edelman calls these claims “false or unproven”, which is generous. To a greater or lesser degree, they are all false. The most dangerous are the claims about vaccines, which are good, and to a large degree the reason that boomers and others are likely to live as long as they are. As a t-shirt I have seen correctly asserts “Vaccines cause adults”!

 

 

Unpasteurized (ie, raw) milk has in fact caused lots of deaths because of bacterial contamination. Testimonials from dairy farmers who drink it all the time are not valid for urbanites who are consuming it days after milking, when the bacteria in it that would have been killed by pasteurization has had time to multiply, The other false claims may not cause death, but sure can cause suffering; I suffered a lot of dental cavities as a kid before our water was fluoridated. Fluoride is definitely helpful to dental health (excessive amounts can cause unsightly, but NOT dangerous, mottling of teeth). Avoiding acetaminophen in pregnancy can cause pain. And on animal protein: it is not more healthful than plant protein, it is in fact, generally less healthful. As is animal fat (e.g, tallow, lard). 

These false claims are relatively easy to refute, although it is not easy to convince people who believe them that they are wrong; these are two different things. But what of the amazing plethora of other magical health claims, today’s equivalents of snake oil (in promises for great health, not to mention quackery). Early in his book, Taylor writes 

Don’t pick up this book expecting to find the magic formula for staying forever young. I ain’t got one. You’re better off cruising TikTok, where a bustling industry of anti-aging influencers serves up a bottomless banquet of science and quackery. They treat aging as a curable condition, death an avoidable fate. 

Sigh. It would be wonderful if these nostrums could keep you healthy and keep you from dying. But they don’t. That doesn’t keep them from being a “bustling” (and profitable!) industry.

Three points:

1) Natural is not necessarily better or safer. That is a fallacy. Anything that actually has biologic effects can have the ones you want, and the ones you don’t (side effects). If it doesn’t have any biologic effect, it’s not helping either.

2) Don’t be a sucker. Yes, Big Pharma is evil, but there is much better data on whether and how its products work than those of the MAHA-hood.

3) If it sounds to good to be true, it probably is.

Everything is becoming more unaffordable, but health care may lead this list!

A Mar 23, 2026 NY Times article, “When voters talk about ‘affordability’, many point to health care”, emphasizes how big a deal this is to the American people – and for those who consider this finer point -- American voters. Lots of things have been becoming increasingly unaffordable, so why should health care be different? Housing is ridiculous, and if you live in one of the larger cities in this country, it may well be out of reach. The Times had another piece the same day, “How a Family of 3 Lives on $500,000 on the Upper West Side”, and apparently it is not that easy. In most of America, a family of 3 making a half-million dollars a year, would be rich, but in New York City (and it is similar or worse in San Francisco, Boston, LA, San Diego, DC, etc.) you’re living in a one-bedroom apartment (near Central Park, though) and trying to save up for something bigger, made more difficult by the $4200/month you pay for childcare for your one-year-old, more than the $3900 yoy pay in rent. Doing the math, those two expenses come to less than $100K a year, so they should still have money left, but I guess other things cost a lot as well.

Food is another big issue; even more than housing it is a necessity (there are, sadly, too many unhoused people but no one can go too long without food) and it is a real issue. I had a friend who was from Colombia, and decades ago he observed that he could understand how people could be homeless in the US, but not hungry. Unlike in his country, where housing was cheap and food expensive, you could get a dozen eggs for $1. Well, recently in many places a dozen eggs were above $6. Whatever you think about eating meat, it has become a rare luxury for many families. And gas? Thanks to the US/Israeli attacks on Iran (I take a deep breath and don’t offer more comments) and Iran’s response, gas prices have shot up. I see articles about it being up 20-30%, but where I live in Tucson, AZ it was $2.79 before the attacks and in the same stations is now $4.45 or more (that is about a 60% increase!) The administration has also cut back incentives for non-gasoline cars as they want to push oil and gas – whoops! Since public transportation is so lousy in many places, people depend on cars to get around and get to work when they have a job.

So, with those 3 things – housing, food, and gas (4 if you add childcare) costing so much, it is pretty salient that the people in the Times article single out health care as a main concern about affordability. And, as I have often written, its unaffordability has been increasing and increasing and increasing. Health insurance premiums are up, and for those who receive it through their employers the percent that the employee must contribute is also up. Deductibles are up. Co-payments are up. And even when you pay all that – and frequently people cannot – you may well not get the care you need because insurance companies have ratcheted up their delay-and-deny game, hoping you will give up and not appeal when they deny you coverage for or require your doctor to get “prior authorization” for something you really need, keeping you away with algorithms that stymie your doctors. Or, maybe they completely deny payment because you went to the “wrong” hospital, one that is not in your (really, their) network. Maybe because you were, well, really sick!

Or you could have Medicaid and find that that, as bad as it was, is being cut. Or even more, is cutting you out entirely! Or you may have had health insurance that you could almost afford as an individual through the health insurance exchanges set up by ACA (Obamacare), but now find that subsidies have been cut and there is no way you can continue to afford it. Or maybe you live in a state that never expanded Medicaid (which was the way the ACA sought to cover those too “rich” for Medicaid but too poor to afford insurance on an exchange), and so you have been without access to care for years. Or, maybe are already dead.

Or you could have “traded in” your Medicare, a single-payer program for senior and some disabled people, for “Medicare Advantage”, an insurance company product that sounded great at the start but puts you right back in an HMO, where you have limited providers and the insurance company can deny you coverage. Or, just to be sure that we are not letting anyone out of being screwed, you can have opted for traditional Medicare and find out that the new WiSER program is allowing companies to use AI-based algorithms to deny care in 6 states (so far)!

Wendell Potter’s substack “Health Care Un-Covered” published With CVS’s Vertical Empire Under Threat in Tennessee, the Company Threatens to Leave on the same day (Mar 23) helps explain the reason. While the headline is somewhat optimistic (that the state of Tennessee is trying to reign them in) the real importance is the description of that vertical integration of CVS’ empire, in which they control not just local pharmacies and the health insurance giant Aetna, but also the pharmacy benefit manager (PBM), Caremark, which is now its largest cash cow! It’s a great deal for them, as they pay themselves, and have little competition from small agencies. They do have competition from UnitedHealth, which owns the PBM OptumRx and the provider group Optum, and CIGNA, which owns ExpressScripts, (which Potter explains Just Got Sued for Racketeering), so it is not an monopoly, just an oligopoly with a small number of players. And not one of those players is at all interested in your health. They are entirely focused on their bottom lines, as I discussed on Feb 26, 2026 in The problem with the US healthcare 'system': THE INSATIABLE PURSUIT OF EVER MORE MONEY BY CORPORATIONS AND WALL ST.  

The Times article emphasizes the political conflict between Republicans, who have been responsible for all the cuts and are trying to make it worse, acting exactly as if their goal is to hurt and kill lower-income people, and the Democrats who are trying (unsuccessfully so far) to block cuts to ACA and Medicaid, and perhaps place some limits on Medicare Advantage. But most “mainstream” (read “corporate”) Democrats are severely limiting their suggestions to, basically, returning to Obama-era goals. A significant minority of Democrats in both the House and Senate have signed on to cosponsor the Improved and Expanded Medicare for All bills that would move the US into the mainstream of healthcare in all wealthy countries by completely covering everyone for everything (see Yes, Rep. Van Drew, there IS a solution!,  Dec 30, 2025)! If that happened, the US would no longer be a standout for bad, paying 2-3 times what other countries pay and having worse health outcomes – and, as described above, moving in the wrong direction.

I don’t think that most Democrats are opposed to your receiving quality healthcare at a reasonable price (not sure about Republicans) but they get lots of money from these insurers, PBMs, and health systems. They need to hear from you!

Why is it so hard to get medical care? And what should we do about it?

You may have noticed, should you or a family member or a friend have had a health problem recently, that it is difficult to get care. It is difficult to find a doctor (or a nurse practitioner, or any health care provider) who is available to add you to their panel. If you are lucky enough to have one, especially one who practices primary care (a family physician or general internist or geriatrician for adults), it is still difficult to get an appointment. If you think you just have a simple question, it can be difficult to get through to them to ask it. Sometimes you can get a nurse, or a medical assistant, or perhaps the desk clerk who may be familiar with some things enough to answer, but often they cannot. Many practices now have “patient portals” (e.g., MyChart ®) where you can post a question for your doctor (often in the form of “I have these symptoms but I can’t get an appointment; do you think I need to be seen?”) that, hopefully, they will answer before you are in extremis.

When all these methods fail, and you are still sick, you can visit an Urgent Care Center, sometimes run by local health systems and sometimes by private chains. They can care for many problems and do some tests, but a lot of things will lead to them sending you to the local Emergency Department. That is, of course, what you were trying to avoid, if for no other reason than the long wait (often hours, even if you have a severe problem that, once they diagnose it, can truly be an emergency; I wrote in the past about a close family member who waited 7 hours to be found to have appendicitis). Not all ED waiting rooms look like “The Pitt”, but it is not uncommon, especially in those centers who have the facilities to care for really dire problems needing urgent intervention (heart attacks, strokes, acute abdominal issues needing surgery, etc.) 

A big part of the problem is that there is a shortage of primary care physicians. This is worse in the US than in other countries but is becoming a problem elsewhere as well, as discussed by Dr. Kenny Lin in “Primary Care Supply and Access Challenges Around the World” on his substack CommonSenseMD. There are also shortages of other physicians (thus the line out the door of the cardiologist’s office), exacerbated by distribution problems (specialists tend to group in major cities and wealthier suburbs). But much of the delay in getting into subspecialists would be mitigated by having more family doctors and other primary care physicians. This works in 4 ways:

1.      The primary care doctor can take care of lots of the problems that people otherwise seek out subspecialty care for. Because you have a heart, it doesn’t mean you need a cardiologist.
2. If the primary care doctor identifies a problem that they think does require a subspecialist (say, a cardiologist) they can refer you to one who is less backed up because primary care doctors have done an assessment and identified that there is a problem requiring a subspecialist. This also makes the subspecialist more effective, because the people they see have already been assessed by a physician and they have a clearer issue on which to focus their attention.
3. Once the subspecialist does their assessment, makes their treatment plan, and initiates it, much of the follow-up can be done by the primary care doctor, freeing the subspecialist from needing to see so many follow-ups and having more appointments for new patient assessments.
4.  Many people (especially older people) have more than one health problem. Not only is going to a separate subspecialist for each potentially inefficient and possibly unnecessary, but can result in “communications problems” between them. This can be dangerous for the patient, in part because treatments for one condition sometimes worsen another. Having a primary care doctor who cares for the whole person, not just one organ system or disease, and is in possession of the assessments and plans from all the subspecialists, means the patient receives care that is coordinated and managed appropriately.

This model is understood and often utilized by subspecialty physicians who understand that their time and effort is best spent in the narrow area in which they are expert. The problem is that it requires a sufficient number of primary care doctors (about 40-50% of physicians), and, in the US, we don’t have them, and are not even moving in the right direction. As I have discussed before, a big reason that students do not choose to become primary care doctors is money…that their incomes are far less than subspecialists, and this needs to be addressed (see, for example, Primary Care, Private Equity, and Profit: How to ensure poor quality care for the American people, Sept 28, 2023).

Another part of the reason people do not access care is cost; the American Academy of Family Physicians (AAFP) newsletter Family Medicine Today reports on a survey by West Health-Gallup that 1 In 3 Americans Are Making Basic Living Sacrifices, Borrowing Money To Afford Health Care. Of course ‘…the “need to make these trade-offs was far more common among the uninsured, Gallup found, with 62% saying they made at least one sacrifice to afford their care. However, 29% of those with insurance also said they were forced to make a trade-off to cover their health care costs.” So…a big problem.

The cost issue may seem to be one that is more clearly related to my contention, in a recent blog (Feb 26, 2026), that The problem with the US healthcare 'system': THE INSATIABLE PURSUIT OF EVER MORE MONEY BY CORPORATIONS AND WALL ST., but in fact so is the shortage of primary care physicians and the difficulty getting appointments. On Feb 18, Health Care Un-covered addressed “The Economic Exploitation of Independent Physicians by Insurers”. It is also a result of practices being owned by profit-making private equity companies (or sometimes by insurance companies, such as UnitedHealth owning Optum) that determine the practice parameters and character, including the speed-up (seeing more patients more quickly) and other business approaches that are good for making money but not for people’s health. In addition, this includes the practice of replacing primary care physicians with less-trained non-physicians, such as nurse practitioners and physician’s assistants. I don’t mean to disparage these professionals, and indeed they can be very good and effective in the roles they are put in – seeing acute minor illnesses or checking on the status of chronic illness such as diabetes and hypertension. But being the coordinator, the “quarterback” – of care for the whole person that the primary care physician can fill, as I described above, requires more, not less, training. It makes care better; not the “most profit” or the “most efficient” but the “most likely to maintain and improve the patient’s health”. Even when for-profit companies don’t own the practices, “A wave of coordinated lawsuits is transforming the No Surprises Act’s arbitration system into a battlefield where insurers seek to intimidate physicians, rewrite the law and consolidate control” (How Insurers Are Using the Courts to Rewrite the No Surprises Act, Health Care Un-covered, Mar 11).

The health of the US population has long been worse, using generally accepted health parameters and measures, than in comparable countries. The situation is not improving, as insurers decrease access by increasing premiums and co-pays and deductibles, forcing a significant percentage of Americans to cut back on other necessities, as well as often denying coverage for important care. These practices control not only patients but physicians, along with the control exerted by hospital systems are for-profit ownership of physician practices. It also contributes to a downgraded role and lower pay for primary care physicians, who are key to maintaining health in the US and other countries. It is not a good situation, and it is getting worse, if Americans’ health is the measure.

It is past time for us to ensure that this is the measure, and not maximizing the profit of corporations!