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CVS to gain more clout by acquiring Target Rx business

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Cornell Merlo_Target CVS Deal_featured

Target chairman and chief executive officer Brian Cornell (left) with CVS Health president and CEO Larry Merlo.

WOONSOCKET, R.I. — Continuing its aggressive growth and diversification, CVS Health has purchased Target Corp.’s pharmacy and clinic businesses for some $1.9 billion.

The acquisition propels CVS past Walgreens as the nation’s No. 1 pharmacy operator by market share and store count. CVS will have close to 9,500 prescription counters. Walgreens had 8,232 as of ­mid-June.

Under the deal, CVS will acquire Target’s more than 1,660 pharmacies across 47 states and operate them through a store-within-a-store format, branded as CVS/pharmacy. In addition, a CVS/pharmacy will be included in all new Target stores that offer pharmacy services.

Target’s nearly 80 clinics will be rebranded as MinuteClinic, and CVS will open up to 20 new clinics in Target stores within three years of the deal’s closing. The additional clinics will push CVS toward its goal of operating 1,500 MinuteClinics by 2017.

In addition, CVS and Target plan to develop five to 10 small, flexible-format stores — branded as TargetExpress and including a CVS/pharmacy — over a two-year period following the transaction’s ­closing.

The deal came less than a month after CVS announced its acquisition of Omnicare — the nation’s largest provider of pharmaceutical services to long-term-care facilities — for $12.7 billion.

“CVS Health is building a business that has a lot of interlocking synergies in many different parts of the health care system,” Adam Fein, president of Pembroke Consulting Inc. and chief executive officer of Drug Channels Institute, told The New York Times. “The Target deal is one more step in their goal of becoming the most significant company in the drug distribution and reimbursement system.”

With the acquisition bulking up CVS’ presence in Seattle; Denver; Portland, Ore.; and Salt Lake City, Fein noted that the company’s Maintenance Choice offering will be more attractive to plan sponsors seeking scale. Limited overlap means the Target pharmacies should not significantly cannibalize nearby CVS/pharmacy units, he added.

“This strategic relationship with Target supports the highly complementary customer base, brand and culture we share,” said CVS Health president and CEO Larry Merlo. “When we introduced the new name for our company, CVS Health, we began a new era of growth with a broader health care focus and an appreciation of the rise of health care consumerism with consumer choice and accountability growing. This relationship with Target will provide consumers with expanded options and access to our unique health care services that lead to better health outcomes and lower overall health care costs.”

Target shoppers will have access to CVS pharmacy programs — including Pharmacy Advisor and Specialty Connect as well as Maintenance Choice — to help them achieve better medication adherence through both greater convenience and enhanced counseling. CVS has also committed to having a low-cost generic drug option available to Target’s cash-paying customers. In addition, with MinuteClinic at Target stores, Target shoppers will have enhanced access to affordable medical care. CVS customers will gain the option of an expanded, one-stop-shopping experience when seeking health care services.

“At Target, we’ve talked a lot about the evolving preferences of our guests, and this partnership demonstrates that we’re committed to putting them at the forefront of everything we do,” said Target chairman and CEO Brian Cornell. “By partnering with CVS Health, we will offer our guests industry-leading health care services and, at the same time, sharpen our focus on elevating the way we deliver wellness products and experiences to our guests.”

The relationship also unlocks joint development opportunities. Besides selecting sites for the small-format stores, CVS and Target will explore new market offerings that have the potential to generate strong returns on investment and offer long-term benefits for customers and communities.

“We operate in a rapidly changing health care and regulatory environment,” said Merlo. “This requires companies like CVS Health to continually innovate, providing additional points of access, lowering costs and improving quality for both consumers and payors.”


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