CVS has invested $100M in Carbon Health. Is yet more primary care M&A in the offing?

Carbon Health, a primary health provider that offers same-day appointments, virtual visits and other tech-enabled services, has received a $100 million investment from CVS Health Ventures, the corporate venture capital arm of CVS Health.

The deal is Carbon Health's first major funding from a corporate investor and one that may eventually lead to a strategic acquisition, according to Rebecca Springer, a senior healthcare analyst at PitchBook.

In 2021, CVS was in acquisition discussions with One Medical, another major concierge primary care provider, according to a regulatory disclosure. But the M&A talks failed. Less than one year later, One Medical sold to Amazon for $3.9 billion including debt.

CVS is not giving up on its primary care growth ambitions.

The drugstore giant has been providing walk-in medical services at its retail locations since the 2000s. Its in-store clinic offerings, however, have been basic-routine physicals, screenings and immunizations. In May 2022, the company announced the creation of CVS Health Virtual Primary Care, a comprehensive primary care service.

In September, CVS announced an approximately $8 billion acquisition of Signify, a value-based care provider that's focused primarily on in-home health evaluations.

A partnership or an acquisition of an in-person full-service primary care provider similar to One Medical would be the 'logical next step' for CVS to achieving it primary care aspirations, Springer wrote after the acquisition of Signify.

'Carbon Health's hybrid primary care-plus model is comparable to One Medical's, though, unlike One Medical, it does not utilize a membership model,' she said in an interview.

It's common for potential acquirers of private companies to first make a minority investment and try out a strategic partnership before proceeding with an acquisition bid. CVS said that as a part of its deal, it would pilot Carbon Health inside select CVS locations.

Carbon Health was last valued at $3 billion in August 2021 when it raised a Series D led by Blackstone Alternative Asset Management. Other investors in the company include Dragoneer Investment Group, Brookfield Growth, DCVC, 500 Global and Lux Capital.

The primary care provider has not been immune from the reversal of the pandemic-fueled boom. In June, Carbon Health laid off 250 employees, approximately 8% of its staff, and just last week it further reduced its workforce by 200 positions, as well as announcing plans to close remote patient monitoring and chronic care programs.

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