Size matters to CVS Health Corp. (formerly CVS Caremark), a leading pharmacy benefits manager with nearly 75 million plan members as well as the nation's #2 drugstore chain with more than 9,600 retail and specialty drugstores under the CVS, Navarro, and Longs Drug banners. In addition to its stand alone pharmacy operations, the company operates CVS locations inside
stores, and runs a prescription management company,
Caremark Pharmacy Services
. The growing company also offers specialty pharmainfusion services business, as well as walk-in health services through its retail network of MinuteClinics that are located in around 1,000 CVS stores. In mid-2015, it acquired nursing home pharmacy
in a $12.7 billion mega deal.
CVS Health operates through two main segments: Pharmacy Services and Retail/LTC (long-term care).
Pharmacy Services, which accounted for 58% of sales during 2015, 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 Retail/LTC segment (42% of sales) operates 9,655 retail stores with pharmacies (including 1,672 pharmacies located in Target stores), as well as MinuteClinic locations, long-term care pharmacy operations, and online operations (CVS.com, Onofre.com.brTM, and Navarro.com). The pharmacy accounts for more than two-thirds of sales in this segment, while "front store" retail merchandise accounts for the rest. CVS' 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.
CVS drugstores are located in 49 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 around 1,000 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 has been ramping up its advertising spend in recent years. It spent $221 million on advertising in 2015, up from $212 million and $177 million in 2014 and 2013, respectively.
CVS Health's annual revenues and profits have risen roughly 50% since 2011 thanks to aggressive store openings/acquisitions and expansion into new business lines.
The health company's revenue jumped 10% to $153.29 billion during 2015, thanks mostly to 13% growth in the Pharmacy Services segment on new client business, higher new-product sales volumes, and the addition of specialty pharmacy operations of Omnicare. Retail/LTC sales also increased by 6%, both from same-store sales and net revenues from new and acquired stores, which helped add to the top line.
Strong revenue growth in 2015 drove CVS' net income up 13% to $5.24 billion. The company's operating cash levels climbed 3% to $8.41 billion for the year thanks to a rise in cash earnings.
CVS continues to evolve from being a general pharmacy store, expanding into more specialty fields of the fast-growing healthcare market. Its mid-2015 acquisition of Omnicare moved it into nursing home pharmacy, while its acquisition of Coram in 2014 pushed the company into the specialty pharmainfusion services business for the first time. Its infusion 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.
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 health care 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.
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
. Indeed, CVS has expanded its store count from 7,388 stores at the end of 2011 to nearly 9,700 stores today. During 2015 alone, in addition to boosting its pharmacy count by acquiring 1,672 locations in Target stores in 2015, CVS opened 161 new retail pharmacy stores, relocated 58 stores, and closed 31 stores.
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
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
In late 2015, CVS acquired
's pharmacy and clinic operations for $1.9 billion. As part of the deal, CVS acquired more than 1,600 pharmacies from Target in 47 states and is operating them under the CVS name in Target stores. CVS will also operate branded pharmacies in new Target stores that offer pharmacy services.
In a significant deal for the pharmacy sector, CVS in mid-2015 purchased
, one of the country's largest nursing home pharmacies, for $12.7 billion. The milestone deal strengthened CVS' specialty pharmaceuticals business (particularly in the areas of cancer and multiple sclerosis) and placed it in a more optimal position to renegotiate supply contracts.
The company struck a sizable deal to expand its specialty pharmacy operations in 2014 when it acquired
, 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
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
and pharmacy management battle with