About CVS REVCO D.S., INC.

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 7,800 retail and specialty drugstores under the CVS, Navarro, and Longs Drug banners, it trails rival Walgreen (8,300) in store count. In addition to its pharmacy operations, the company sells retail items, and runs a prescription management company, Caremark Pharmacy Services. The company also offers walk-in health services through  its retail network of MinuteClinics that are located in more than 900 CVS stores.

Operations

CVS Health operates through two main segments: Pharmacy Services and Retail Pharmacy.

Pharmacy Services, which accounts for nearly 60% of sales, is the company's prescription benefits management (PBM) division. It dispenses drugs through nearly 30 retail specialty pharmacy stores, more than 10 specialty mail order pharmacies, and four mail order dispensing pharmacies. It also operated more than 85 medical branches, most of which are ambulatory infusion sites, but also include specialist infusion and enteral service facilities. Its other offerings include plan design and administration, formulary management, discounted drug purchase arrangements, and a slew of other services. All told, the division fills more than 930 million prescriptions per year.

CVS's better-known Retail Pharmacy segment generates more than 40% of sales, and operates a network of more than 7,800 retail drugstores, more than 970 MinuteClinic locations, and online operations (CVS.com and Navarro.com). The pharmacy accounts for more than two-thirds of sales in this segment, but the company also sells other "front store" retail merchandise. Additionally, CVS' fast-growing MinuteClinics, which are primarily located in CVS stores, are staffed by nurse practitioners and physician assistants who treat minor conditions, perform health screenings, and deliver vaccinations; some locations also treat chronic conditions.

Geographic Reach

CVS drugstores are located in about 45 US states, the District of Columbia, Brazil, and Puerto Rico. The company also operates pharmacies under the Longs Drugs banner in California, Hawaii, Nevada, and Arizona. MinuteClinics are located in more than 970 store locations across 31 states and Washington, DC.

Sales and Marketing

Pharmacy Services' clients include employers, insurance companies, unions, and other health care plan sponsors. The segment makes direct sales of its prescription drugs through its mail service dispensing pharmacies. It also sells indirectly through its retail pharmacy network.

CVS spent $212 million toward advertising in 2014, which is up 19% from 2013, but down 4% from the $221 million it spent in 2012.

Financial Performance

CVS Health has enjoyed steady revenue growth since 2010. Revenue rose by 10% to $139.4 billion in 2014, thanks mostly to double-digit growth in the Pharmacy Services segment as new business volume rose on its own and through the recent acquisitions of Coram and Specialty Connect. Retail pharmacy sales also increased by 3%, both from same-store sales and net revenues from new and acquired stores, which helped add to the top line.

Higher revenue helped drive net income up by 1% to $4.64 billion in 2013. Profits could have been higher, but CVS had to pay $521 million in premiums and fees for prematurely extinguishing $2 billion worth of its senior debt.

Operations provided $8 billion, or 41% more cash than in 2013, thanks to higher net income and higher accounts payable due to payables management and timing.

Strategy

Positioning itself to become more health-oriented, CVS in late 2014 changed its name to CVS Health from CVS Caremark to coincide with the elimination of tobacco sales at its stores and to reflect commitment to its growing healthcare business. Also in late 2014, it furthered its ties to the health care industry by announcing new clinical affiliations with the University of Maryland Medical System, University of Texas Medical Branch at Galveston, and the University of Alabama Health System. 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.

With its acquisition of Coram in 2014, CVS has also been focusing on expanding its Coram CVS specialty infusion services business. The business offers ambulatory infusion suites, which offer patients an alternative to a hospital environment with IV infusions and other infusion therapy services in a safe, monitored area. In May 2014, the company opened two new branch pharmacy and infusion sites in regions underserved by hospitals, including one in El Paso to serve patients in the Western areas of Texas, and one in Richmond to serve patients in the Eastern and Northern parts of Virginia.

The company's Retail Pharmacy Store Development plan -- focused on entering new markets, adding stores in existing markets, and relocating stores to more convenient sites -- has been essential for business growth and in keeping up with archrival Walgreen. In 2014, CVS opened more than 150 new retail pharmacy stores (including its first in Washington state), acquired 33 stores, relocated 60 stores, and closed 22 non-performing stores. The prior year it opened nearly 170 new stores, relocated nearly 80 stores, and closed about 15 stores. While its Navarro Discount Pharmacy chain comprises just over 30 of its stores, the brand represents the company's attempt to woo the fast-growing Hispanic segment of the US population.

In addition to opening new stores, CVS has made efforts 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. Additionally, in 2014 CVS 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.

In 2014 CVS bought California-based drugstore chain Navarro Discount Pharmacy; marking its largest acquisition since its Longs Drug purchase in 2008. 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.

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CVS REVCO D.S., INC.

1 Cvs Dr
Woonsocket, RI 02895-6195
Phone: 1 (401) 765-1500
Fax: 1 (401) 766-2917
www.cvscaremark.com

Stats

  • Employer Type: Public
  • Category Manager: Jane Ellis
  • V Pres-treas: Phillip Galbo
  • Assistant Vice President: Kenneth Mortensen

Major Office Locations

  • Woonsocket, RI

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