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The year that just ended was one to remember for CVS Health. While maintaining a level of performance that set the standard for the retail pharmacy sector, the company made a series of moves that broadened and deepened its reach in the nation’s health care and retail industries.
Since its acquisition of the Caremark pharmacy benefits management business in 2007, CVS’ vision has extended well beyond its roots in health and beauty care retailing. The company, which now includes some 7,900 drug stores, 1,000 walk-in medical clinics, the PBM and a burgeoning specialty pharmacy operation, further expanded its range of assets last May when it agreed to pay $12.7 billion for Omnicare Inc., the largest provider of pharmacy services to long-term-care facilities in the United States. The transaction instantly positioned CVS Health to play a major role in meeting the pharmacy needs of the growing population of senior citizens and other patients confined to nursing homes and similar facilities.
Growth through acquisition was the tool used to transform CVS from a regional drug chain into a national retail power, and the company once again employed that strategy to strengthen its core business. In June CVS entered a partnership with Target, under which it purchased the discounter’s 1,660 pharmacies and 80 retail clinics for $1.9 billion and agreed to operate them in a store-within-a-store format. The deal significantly enlarged CVS’ pharmacy network, making it more attractive to third-party payers and augmenting its bargaining power.
Steps were taken to enhance CVS/pharmacy’s front-end business. In keeping with the company’s mission of helping people on their path to better health, “good-for-you” food and beverage choices are now displayed more prominently than before. In addition, the shopping experience for beauty care consumers was “elevated.”
Those accomplishments — together with a strong PBM selling season that generated $11.5 billion in new business and saw a 98% client retention rate; 33% growth in specialty pharmacy revenue; and better purchasing of generics through Red Oak Sourcing, a joint venture with Cardinal Health — show that CVS Health is at the top of its game.
President and CEO Larry Merlo hit the mark when he said, “We’ve built a one-of-a-kind company, and we’re not standing still.”