Inside This Issue - Opinion
CVS Caremark: Itís all about the company
January 7th, 2013
by David Pinto
No more confusing or misunderstood retail or health care alliance exists today than the relationship among the CVS drug chain, the Caremark PBM and the MinuteClinic immediate-care network.
To most observers, and even some people who claim to be industry insiders, CVS Caremark is little more than a loose alliance of three separate and only marginally related business enterprises. Under this definition, each unit benefits only tangentially from the activities of the other two, and those benefits that do accrue to Caremark or MinuteClinic from their alliance with CVS can more accurately be attributed to chance than to planning or perspicacious thinking.
In fact, as is slowly becoming increasingly clear, CVS Caremark is not, nor has it ever been, the joining of two or three disparate companies. Rather, it is the coming together of three complementary organizations to form a single entity. It is that entity, CVS Caremark, that must be evaluated when assessing the impact of the organization, not the performance of its individual units.
Utilizing that yardstick, CVS Caremark has emerged, five years after the two companies came together, as one of the major health care success stories of this or any era.
The numbers are impressive. Corporate sales for the fiscal year that will end December 31 are expected to reach $122.6 billion, while net earnings will exceed $4 billion. The organization operates more than 7,400 drug stores in 44 states and the District of Columbia and Puerto Rico and 640 MinuteClinic units in 25 states. The latter set of figures is expected to reach 1,500 in 35 states by the end of 2017. More significant, the MinuteClinic facilities will, more often than not, adjoin, complement or closely align themselves with individual CVS drug store locations.
But in this case the numbers are less important than the synergies this organization has been able to create and develop. Caremark has emerged from a three-year transition period as the most impactful, if not the largest, PBM in the United States. It is currently second among PBMs in volume, behind Express Scripts, with anticipated 2012 sales of $54.7 billion. More to the point, it has a client retention rate of somewhere around 96%, while attracting far more new customers annually than it loses.
But what makes Caremark special is the ability it has developed to utilize both its CVS drug store network and its MinuteClinic facilities for the benefit of its customers.
In touting the objectives of CVS Caremark, the company’s top managers emphasize these three: providing easier access to health care, controlling health care costs and influencing patient outcomes. And indeed the organization is moving, quickly and impressively, toward realizing those goals.
It is doing so by providing Caremark members with easily attainable benefits through its CVS and MinuteClinic units. Among them, Caremark members gain opportunities and incentives through the CVS drug stores to more closely and easily comply with and manage their prescription drug therapies.
At the same time, these members are encouraged to use the MinuteClinic facilities to monitor their health more closely and more frequently, an advantage that will become increasingly important in an era that combines a shortage of primary care physicians with an aging population and the spread of such chronic illnesses as diabetes and obesity.
In this context the performance of any individual CVS Caremark entity — MinuteClinic, after all, currently records annual sales of less than $200 million — matters far less than the performance of the total organization. And the imperfections or weaknesses of any unit are secondary in importance to the synergistic impact each unit exerts on the corporation — and the effectiveness of those synergies in influencing the health of its patients.
So the important thing here is to resist the impulse to examine, analyze or evaluate CVS Caremark exclusively on the performance of the drug chain or the scope, impact or profitability of the immediate-care clinics, but to evaluate instead the performance of CVS Caremark as a health care organization. Viewed in this context, CVS Caremark is among the most influential and important health care organizations at large in America today.
Moreover, with President Obama’s health care reform program now a reality, the impact of CVS Caremark will certainly increase dramatically in the period just ahead, if only because some 35 million Americans will obtain access to medical and prescription drug coverage.
So, as 2012 winds down and 2013 begins, CVS Caremark can rightly claim the title of the nation’s most significant and far-reaching health care provider. It is a title the organization has clearly earned.