Trailblazer embarks on new chapter

CVS Caremark will continue to focus on lowering healthcare costs while improving the health of its consumers and leveraging its integrated pharmacy services model.

Over the years, CVS Caremark has grown from a go-getting New England-based regional player to a nearly $100 billion pharmacy healthcare giant known for its vertically integrated pharmacy-PBM model via the 2007 acquisition of Caremark, its highly successful loyalty card program and its innovative beauty concepts.

Now, the industry trailblazer is embarking on a new chapter with a new leader at the helm and a keen eye on driving medication adherence, curbing rising healthcare costs and improving the health outcomes of its patients nationwide with its far-reaching store network and arsenal of products and services.

Larry Merlo took the reigns as CEO on March 1, becoming CVS’ fourth CEO in the company’s history. Tom Ryan retired as CEO after spending 36 years with the company, and had remained nonexecutive chairman until 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 stores, 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 the company’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 ways such as improving dividend payouts and share repurchases.

“We certainly have the right assets in place to continue to be a very successful company for years to come, and that is a real credit to [Tom Ryan’s] vision of the future of pharmacy health care. Throughout his tenure, Tom has built a culture that is focused on innovation, customer service and flawless execution, and I certainly look forward to building upon his legacy,” Merlo told analysts in February.

Merlo has clearly hit the ground running, quickly extinguishing conjecture in the market­place of potential plans to split up the company, outlining a five-point plan for PBM profit improvement and emphasizing the company’s ability to “effectively compete” in the PBM industry.

Year 2011 is slated to be 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 February’s conference call.

Furthermore, CVS Caremark’s acquisition of the Medicare Part D business of Universal American not only more than doubles the size of CVS Caremark’s Medicare Part D program, but the move came just as the first baby boomers turned 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. 

Aside from expanding its footprint and scope of service — through such offerings as its monitoring services for patients with diabetes, high cholesterol, high blood pressure and asthma — MinuteClinic also is forming a number of strategic affiliations with health systems to enhance the high-quality, affordable healthcare services provided to patients and communities across the country.

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 CVS’ 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, healthcare-reform strategy, etc., 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.

Clearly, Ryan’s retirement earlier this year marked not an end of an era, but rather the beginning of a new chapter for the Woonsocket, R.I.-based powerhouse.

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