Size matters to CVS Health Corp. (formerly CVS Caremark), the nation's #2 drugstore chain and a leading pharmacy benefits manager with nearly 65 million plan members. With more than 7,600 retail and specialty drugstores under the CVS, Navarro, and Longs Drug banners, it trails rival Walgreen (8,300) in store count. CVS has grown rapidly through a string of acquisitions that included the Eckerd and Longs Drug Stores chains. Also, CVS now owns prescription benefits management (PBM) company Caremark Rx. Caremark Rx was combined with CVS's PBM and specialty pharmacy unit PharmaCare Management Services to form Caremark Pharmacy Services. Its MinuteClinic retail health network has some 900 locations inside CVS stores.
With a network of more than 7,600 retail drugstores, hundreds of MinuteClinic locations, retail specialty pharmacy stores, specialty mail order and mail order pharmacies, online operations (CVS.com and Caremark.com), and a prescription benefits management (PBM) division, CVS Health is the nation's largest integrated pharmacy operation. During 2013 the company opened nearly 170 new stores, relocated nearly 80 stores, and closed about 15 stores. While its Navarro Discount Pharmacy chain is only 33 stores, it represents the company's attempt to woo the fast-growing Hispanic segment of the US population.
Caremark Pharmacy Services' clients include employers, insurance companies, unions, and other health care plan sponsors. The prescription benefits manager dispenses drugs through its mail order pharmacies and a national network of more than 68,000 retail pharmacies, including CVS drugstores. The company also provides health management programs for more than 25 conditions through its partnership with Alere, LLC.
In 2013 the company operated 800 MinuteClinics, primarily located in CVS stores, in 28 states and Washington, DC. The clinics are staffed by nurse practitioners and physician assistants who treat minor conditions, perform health screenings, and deliver vaccinations; some locations also treat chronic conditions. The company in 2014 announced plans to introduce the concept to Rhode Island, where it is opening several MinuteClinic locations.
CVS drugstores are located in about 45 US states, the District of Columbia, and Puerto Rico. The company also operates pharmacies under the Longs Drugs banner in California, Hawaii, Nevada, and Arizona.
Sales and Marketing
CVS reported advertising costs of $177 million in 2013, down 20% from $221 million spent in 2012.
The company has seen stable growth in revenue since 2010. In fiscal 2013 revenues rose 3% to $126.8 billion (versus $123.1 billion in 2012), primarily as a result of increased pharmacy income related to specialty drug cost inflation. Retail pharmacy sales increased that year, both from same-store sales and net revenues from new and acquired stores. However, an increase in the dispensing rates of generic drugs has depressed revenues across the company during the past few years.
Net income rose 18% to $4.6 billion in 2013, compared to $3.9 billion in 2012. The rise in profitability was driven by the company's higher revenues that year. Cash spent on inventories as well as on suppliers and employees led to a decrease in cash flow from operations, which fell 13% to $5.8 billion in 2013.
The company in September 2014 changed its name to CVS Health from CVS Caremark Corp. (adopted in 2007 following the merger of CVS and Caremark RX) to coincide with the elimination of tobacco sales at its stores and to reflect its growing commitment to delivering health care products and services -- a growing part of its business. Further deepening its ties to the health care industry, CVS announced new clinical affiliations with the University of Maryland Medical System, University of Texas Medical Branch at Galveston, and the University of Alabama Health System in fall 2014. Patients served by these medical centers will have access to clinical support, medication counseling, chronic disease monitoring, and other health services at CVS pharmacies and MinuteClinics.
Continued expansion of CVS's drugstore network is a key element of its growth strategy and essential if it's to keep up with archrival Walgreen. (With CVS and Walgreen drugstores carpeting the nation's suburbs, Walgreen is now seeking to conquer urban America and Europe.) In addition to opening new stores, CVS is attempting to increase sales at existing ones. Prescription drugs account for more than two-thirds of its sales, and the retailer is attempting to grow revenues from over-the-counter medications and general merchandise through its growing private-label product offering. The chain occasionally turns to acquisitions for growth.
In order to provide integrated health care management, the company is utilizing its expertise in pharmacy benefits management services. Its offerings include plan design and administration, formulary management, discounted drug purchase arrangements, and a slew of other services.
In 2014 CVS Caremark formed a 50/50 joint venture with Cardinal Health to provide generic drugs in the US; the new venture is the largest generic sourcing entity in the US. The two companies also extended their existing pharmaceutical distribution agreement through mid-2019.
Mergers and Acquisitions
The company struck a sizable deal to expand its specialty pharmacy operations in 2014 when it acquired Coram, a provider of specialty pharmaceuticals and infusion therapy services. CVS paid some $2.1 billion to purchase Coram from its former parent, home health provider Apria Healthcare.
CVS made its largest acquisition since its 2008 purchase of Longs Drug when in 2014 it bought California-based drugstore chain Navarro Discount Pharmacy. Navarro, the largest Hispanic-owned drugstore chain in the country, gives CVS entrée into the fastest growing segment of the population; the stores will, therefore, keep the Navarro name. Its Navarro Health Services also boosts CVS' specialty pharmacy segment, keeping with its plan to fuel growth beyond its drugstore arms race with Walgreen and pharmacy management battle with Express Scripts.