CVS aims for growth behind new leader

With a new leader at the helm, a robust management team in place and an unwavering focus on driving medication adherence and reducing healthcare costs, CVS Caremark remains squarely on the growth path and continues to play an increasingly important role in U.S. health care with its far-reaching store network and arsenal of products and services.

There’s no doubt that 2011 and beyond will be significant for the nearly $100 billion powerhouse as it embarks on a new chapter under the guidance of Larry Merlo, who now holds the title of CEO as of March 1, in addition to president. Tom Ryan retired as CEO after spending 36 years with the company and will remain non-executive chairman until his retirement at the company’s annual meeting of shareholders in May.

The decision to select Merlo as the new CEO came as little surprise as he has played a key role in the evolution of the company and has an impressive track record of integrating major acquisitions. Under Merlo’s leadership, CVS completed some of the most successful acquisitions in the history of retail pharmacy, including Longs Drug, Osco/Sav-on, Eckerd and Revco, and delivered significant organic growth in major markets across the country.

Merlo has indicated that under his watch, three things will define CVS Caremark’s future success:

Flawless execution of its strategy, which is lowering healthcare costs while improving the health of its consumers and leveraging its integrated pharmacy services model;

Stressing more cross-functional thinking and action across the company, producing even higher levels of customer service; and

Enhancing value for all of its shareholders in such ways as improving dividend payouts and share repurchases.

“We are building on a strong foundation. CVS Caremark is the leader in providing integrated pharmacy health care. No one else has our combination of the largest chain of retail stores, a leading [pharmacy benefit manager], the fastest-growing retail health clinics and a strong track record of healthcare innovation,” Merlo stated.

CVS Caremark continues to stress its commitment to its PBM business as, according to Merlo, year 2011 is the year the company will break trends on top-line growth in the PBM, and 2012 is expected to be the year it breaks trends on profit growth.

“There are many reasons for optimism about our PBM’s long-term prospects, starting with its performance in 2012. First and foremost, 2012 is expected to be the strongest year in generic [drug] launch history. … Second, the streamlining benefits will begin to outweigh our investment costs. Third, we will see a ramp in accretion from the Aetna contract. Fourth, we anticipate continued growth in both specialty and the Medicare Part D businesses. And fifth, our focus on client service and satisfaction, along with our innovative products and services, will provide continued momentum in renewal and new sales success,” Merlo told analysts during a recent quarterly conference call.

Furthermore, CVS Caremark’s acquisition of the Medicare Part D business of Universal American will not only more than double the size of CVS Caremark’s Medicare Part D program, but the move also comes just as the first baby boomers turn 65 years old.

MinuteClinic, which by 2015 is estimated to operate about 1,060 clinics in 100 markets, also will take on added significance going forward as 32 million uninsured gain coverage beginning in 2014, amid an ongoing primary care physician shortage. 

Among the most recent developments is MinuteClinic’s clinical affiliation with Advocate Health Care and Advocate Physician Partners to enhance healthcare services provided to patients in communities throughout Chicagoland and central Illinois — marking the largest clinical collaboration between a regional health system and MinuteClinic based on the number of in-store clinic locations.

However, that’s not to say that the front of the store is not of great importance, as evidenced by the continued focus on and success of its ExtraCare loyalty program, which has been expanded with the new ExtraCare Beauty Club, the rollout of a new store brand called Just the Basics, the completion of more than 200 urban remodels in the past year and the implementation of the expanded consumables planogram in about 4,000 stores.

Charged with integrating all the company’s capabilities in branding, communications and healthcare-reform strategy to forge even stronger partnerships and further improve pharmacy care delivery is ExtraCare loyalty program architect Helena Foulkes, who was recently named EVP and chief healthcare strategy and marketing officer.

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