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The change in name of CVS Caremark to CVS Health marks the culmination of a transition almost a quarter century in the making.
Just 25 years ago CVS was one of several regional drug chains with a strong presence in a relatively limited geographic area. Since its founding in 1963 by Stanley Goldstein, Sidney Goldstein and Ralph Hoagland, the company had evolved from a health and beauty aids retailer into a full-line community pharmacy serving customers in 14 eastern states.
The expansion drive that led to CVS’ emergence as a national health care power began in 1990, when the 789-store chain, headed by Harvey Rosenthal, bought Peoples Drug Stores. The transaction raised CVS’ store count by more than 60% and established the company in new Mid-Atlantic markets, including Pennsylvania, Maryland, Virginia and the District of Columbia. In addition, the deal brought an infusion of talent, including Larry Merlo, who now heads CVS Health.
Tom Ryan became CEO in 1994 when Rosenthal moved to Melville Corp., then CVS’ corporate parent. Ryan grasped the critical importance of scale in retail pharmacy and adopted an aggressive growth through acquisition strategy. Revco D.S., Arbor Drug, Longs Drug Stores, large parts of Eckerd Corp., and Osco Drug and Sav-on Drugs were all absorbed by CVS during his tenure.
The retailer made an even bolder move in 2006 when it agreed to merge with Caremark Rx. Ryan and Caremark chairman and CEO Mac Crawford acted on the belief that combining the nation’s second-largest drug chain and No. 3 pharmacy benefits manager would extend the continuum of care in a way that would result in lower costs, improved access and better outcomes for patients and payers.
It was left to Merlo, who took the helm after Ryan retired in 2011, to realize that vision. By enhancing the performance of the PBM division and more closely integrating all aspects of the business, including MinuteClinic, the nation’s largest network of in-store health clinics, Merlo and his team have solidified CVS’ standing as a leading player in health care and accelerated the transformation of the chain drug store into a neighborhood health care center, while, at the same time, maintaining a robust retail component that is ever more closely linked with its primary mission.
That alignment is perhaps best illustrated by the company’s decision to stop selling tobacco and related merchandise. CVS/pharmacy finished phasing out those products at the beginning of September, a month ahead of the timetable it originally laid out in February. One is reminded of the seriousness with which the company takes its commitment to health care when the cost of the elimination of tobacco from its stores — $2 billion a year in lost sales — is taken into account.
The name CVS Health reinforces that positioning and further unifies the brand. Moving forward, the company’s various components will be known as CVS/pharmacy, CVS/caremark, CVS/minuteclinic and CVS/specialty.
“Each year, CVS Health touches more than 100 million people by playing an active, supportive role in each person’s unique health experience and in the greater health care environment,” says Merlo. “Consumers are increasingly taking control of their own health and, through our 26,000 pharmacists and nurse practitioners, we are helping people on their path to better health.
“As a pharmacy innovation company at the forefront of a changing health care landscape, we are delivering breakthrough products and services, from advising on prescriptions to helping manage chronic and specialty conditions.”
There is no doubt about where CVS thinks the retail pharmacy business is headed. The range and size of the capabilities that it has assembled over the past 25 years leave the company as well equipped as anyone to capitalize on the ongoing shifts in the nation’s health care system and find new ways to enhance patient care. Its fortunes are inexorably connected to its ability to deliver quality pharmacy care and coordinate its efforts with other health care providers.
Based on its track record, the bet here is that CVS Health has the wherewithal to attain the goals it has established.
