Ryan reaffirms commitment to Caremark, expects new PBM chief by New Year

WOONSOCKET, R.I. During Thursday’s Credit Suisse Healthcare Conference in Arizona, Tom Ryan, chairman, president and CEO of CVS Caremark, stuck to his guns as he stressed his commitment to the PBM model and said he knows how to turn around the underperformance of the PBM segment. In addition, Ryan said he plans to have a new PBM leader in place by year end.

“This model hasn’t been around that long so when you have some failures people point to the model and say, ‘Well, it has to be the model,’ because there’s no history. There are ebbs and flows in the PBM business …” Ryan said during the Credit Suisse Healthcare Conference, which was Webcast. “… If the model wasn’t working, we wouldn’t have gotten $11 billion of new business [$9 billion of new business in 2009 and nearly $2 billion in 2010].”

As previously reported by Drug Store News, while net revenues for CVS Caremark grew more than 18% during the third quarter, led by sharp gains in its retail segment and its PBM business, the loss of four big contracts and several regional Part D plans since its last earnings call, caused it to narrow its growth outlook for 2010.

“We know what needs to be fixed. I would be concerned if we couldn’t fix it but it is fixable and we know what to do,” Ryan said during Thursday’s presentation.

He said that, going forward, it will focus its marketing message around the core business.

“We focus too much on the retail side … and we forgot to talk about the PBM capabilities. That’s why clients sign us up — mail, generics, customer care, specialty, clinical, drug trends, TDR. We needed to flip that message around,” Ryan said.

Now that the company has some research and history with such products as Maintenance Choice and ExtraCare Health, it will be able to illustrate data previously not available and demonstrate how CVS Caremark can improve medication adherence and lower costs through the use of generics.

Ryan also reminded attendees of the positives and what is proving successful within the PBM model such as Caremark’s expertise in the specialty business; the roll out of integrated products such as Maintenance Choice, which has 400-plus clients; ExtraCare Health, which has 10 million cards out; the roll out of a new pharmacy system; and the new Consumer Engagement System, etc.

“There are a lot of things going on, not to mention the fact that 60% of our business on the retail side continues to outperform the industry,” Ryan said.

When one audience member suggested that the company uses the PBM model to channel business into the CVS stores to create a revenue synergy, Ryan was quick to set the record straight and remind attendees that there is no limited network.

“We didn’t buy the PBM business to drive business to the retail stores. What is going to happen is clients, employees and members are going to choose it. We are neutral to where they go. I want to drive the lowest cost,” said Ryan. He stressed that CVS Caremark has some 60,000 retail pharmacies within its retail network — that’s significantly larger than just the network of CVS/pharmacy stores.

Ryan also said the company is searching for a replacement for Howard McClure, president of Caremark, who is retiring from the company effective Nov. 27, and expects to complete the search by the end of the year.

“I am focusing on someone from the outside. I’m focused on someone who understands the PBM business and understands the nuances of the PBM business. Most of the people [being considered] are from the PBM side and there are one or two from the health plan side that have PBM experience,” Ryan said.

Ryan, who credited McClure, the 30-year Caremark vet, as a key architect of the company’s integrated model, will serve as interim president of the PBM segment while the company searches for a long-term replacement.

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