CVS Caremark Corp. is capitalizing on its “integration sweet spots” to drive growth.

CVS Caremark, Larry Merlo, Mark Cosby, CVS/pharmacy, analyst day, pharmacy retailing, pharmacy benefits management, health clinics, PBM, MinuteClinic, health care, Pharmacy Advisor, Maintenance Choice, Per Lofberg, Caremark, ExtraCare, urban cluster stores, Geoff Walden

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Inside This Issue - News

‘Integration sweet spots’ bode well for CVS

January 2nd, 2012

NEW YORK – CVS Caremark Corp. is capitalizing on its “integration sweet spots” to drive growth.

The intersection of pharmacy retailing, pharmacy benefits management and walk-in health clinics has positioned the company for short- and long-term success, president and chief executive officer Larry Merlo said at its 2011 analyst day here.

The retail business delivered on its promise for 2011, Merlo said, with solid top- and bottom-line growth and consistent share gains.

The PBM was finishing an “excellent selling season,” he said, with unique offerings gaining traction with existing and prospective clients.

The MinuteClinic business was on course to break even on an all-in basis in December, Merlo added. The operation added 100 clinics last year as part of its plan to double its count by 2016. Its current clinics, numbering more than 650, provide an affordable alternative to the emergency room, he said.

Noting that more than three-fifths of maintenance prescriptions are refilled late, he said CVS Caremark has a unique suite of offerings to boost compliance. The company feels “very passionate” about improving adherence, he said.

The new Pharmacy Advisor 3.0 will be a comprehensive clinical program for multiple chronic conditions. An expansion of the original Pharmacy Advisor for diabetes, it will include face-to-face consultations for patients with hyperlipidemia, hypertension, coronary artery disease and congestive heart failure by midyear, and for other conditions by year end, and still others by the end of 2013.

Caremark president Per Lofberg said the PBM’s priorities for this year will include continued momentum in new business wins and retention, development of innovative offerings, and growth of the Maintenance Choice program.

The next generation of Maintenance Choice, which allows patients to pick up maintenance medications at CVS at mail order prices, promises to make it easier than ever to get 90-day scripts. Called Maintenance Choice 2.0, it will give more clients the chance to get at least some of the savings of the original program through a less restrictive plan design ­option.

Demonstrating how a patient could use a CVS Caremark app on an iPad for home delivery of a refill or to arrange pickup at any store, Lofberg said “this is a huge step forward compared to what’s available anywhere today.”

Lofberg, whose contract with CVS Caremark was due to expire after 2012 but has been extended through 2013, said, “Other PBMs that lack integrated mail and retail capabilities will have a bit of a challenge to come up with an offering that provides comparable convenience, service and cost ­savings.”

In the stores, the ExtraCare loyalty program has boosted traffic and basket size, said new CVS/pharmacy president Mark Cosby. Calling it “a true differentiator,” he said, “we will take the sales-driving power of this tool to an even higher level in the coming years.”

This year the chain will pilot a healthy rewards program, providing added incentives to boost loyalty. A successful test will lead to a national rollout in 2013, Cosby said.

The understanding of shoppers gained through ExtraCare will benefit the retailer’s digital program, leading to personalized advertising to cardholders, an “endless aisle” on the CVS website offering products unavailable in stores, and a customized mobile circular.

“Our powerful customer insights, ExtraCare and our digital capabilities will be big future growth drivers for us,” said Cosby.

Also propelling growth will be the chain’s store clustering initiative, he said. The food convenience cluster and urban cluster have already proved their worth. The food cluster, with doubled space for consumables, had a 12% lift in trips. The urban cluster stores — with fresh foods to go and self-checkouts — have seen sales increase by 8% and profits by 9%. There will be 450 urban cluster stores by the middle of this year.

This year will also bring tests of stores catering to Hispanics and people with income extremes, as well as formats designed for top pharmacy and beauty outlets.

“The reality is that one size does not fit all in retail these days,” Cosby remarked. “Every store has its own customer profile, and we can drive sales by better meeting customer needs.”