At his last analyst day, Ryan sets out course for future CVS Caremark
NEW YORK The theme of CVS Caremark’s 2010 analyst meeting held Friday morning here in New York was “Enhancing Shareholder Value.” And that was appropriate as the company used the morning to brief Wall Street on how it plans to lead the industry for years to come in pharmacy services and health care, as well as in the front end of the business, thanks to several recently introduced and upcoming initiatives.
One could say the meeting was a special event, marking the last analyst meeting for chairman and CEO Tom Ryan, who will retire as CEO in May 2011, after 36 years with the company. (As previously reported, Larry Merlo has been named president and COO, and is expected to succeed Ryan as CEO.)
America’s healthcare challenge is opportunity
Ryan kicked off the meeting with a look at some of the healthcare challenges facing the country — all of which represent opportunities for CVS Caremark to demonstrate its leadership in expanding the role of pharmacy.
It is no secret that healthcare costs are rising rapidly, and chronic diseases are on the rise among Americans, Ryan explained. “We have to find a way to deal with this more cost-effectively and more efficiently as a country. Why do we think this is a big opportunity for us? We think this is going to improve our mail-choice business; we think this will improve our MinuteClinic business; we think this is going to drive pharmacy business growth over the next 10 years,” Ryan told analysts.
Ryan also noted the concern over a shortage of primary care physicians, which only stands to get worse as the population ages and more than 30 million Americans gain coverage through healthcare reform.
One area CVS Caremark will look to demonstrate its leadership in is medication nonadherence, which is a nearly $300 billion annual drain on U.S. health care. Nonadherence is a preventable cost, and CVS Caremark is working to help payers drive down that cost, Ryan said.
Enter such innovative offerings as CustomeRx Savings Initiative, Maintenance Choice and Pharmacy Advisor. Through such programs and the leverage of its broad-reaching network, which includes its PBM, MinuteClinic business and retail locations, the company is working to improve outcomes and reduce costs.
For example, its CustomeRx Savings Initiative aims to improve patient’s lives by advocating lower-cost treatment options whenever possible. It is estimated that this year alone, pharmacy interventions will save patients $50 million in out-of-pocket costs by filling scripts for lower-cost alternatives.
“The legislation that was recently passed certainly solves the access [problem], but what has to come has to be a greater focus on both quality and cost,” Merlo added. “Our integrated assets have the unique ability to offer innovative, high-quality, practical solutions that accomplish three things: provide greater access, convenience and choice to pharmacy care; deliver solutions that improve the health of those we serve; and lower the overall cost of health care.”
CVS Caremark also is looking to pharmacogenomics, or genetic benefit management, to drive improved health outcomes and help mitigate costs.
Per Lofberg, president of Caremark Pharmacy Services, discussed how the company is “building the PBM for the next decade.” Clearly, a key factor here is the 12-year collaboration it recently inked with Aetna. As reported, CVS Caremark announced in late July a 12-year agreement with Aetna to provide PBM services to roughly 9.7 million Aetna PBM members and administer about $9.5 billion in annual drug spend, a deal that is believed to be the largest and longest new-term contract ever to have been negotiated in the PBM industry.
“The Aetna deal is clearly a watershed for our company, and actually for the industry as a whole. It was the result of an extensive and exhaustive competitive bidding process, which we obviously view as a significant validation of our integrated model and economics that we can bring to the table, as a result,” Lofberg said. He also noted that the deal is expected to leverage the full-spectrum capabilities of CVS retail, the PBM and MinuteClinic offerings.
In the stores
Of course, with so much focus on other parts of the company, certainly CVS/pharmacy ( i.e., the stores) and the front-end of its business still remain a key component of the company’s future growth plans.
Discussing front-end sales and profitability was Mike Bloom, EVP merchandising and supply chain. According to Bloom, such innovations as store clustering, store brands, its ExtraCare loyalty program and beauty are a big part of the company’s strategic plan.
As reported by Drug Store News, CVS took the wraps off its Urban Cluster store concept, which has a significant focus on consumables and is designed to be a convenient shopping destination for urban dwellers. The company expected to have 300 of its stores converted to the concept by the end of the year, and a total of 1,300 to 1,400 stores reset to the concept over the next few years.
With regard to store brands, the retailer expects its private-label penetration to grow to more than 20% in the next two to three years. To drive that growth and take a leadership role in private label, CVS went back to the old drawing board. The result is a whole new private-label program the company plans to introduce early next year.
“The first thing we did is we conducted customer focus groups where we identified the need for an opening price point value brand. We then defined that the brand would consist of everyday essential products that would help get her through her day,” Bloom explained. Enter Just The Basics, which will launch in February 2011 with more than 100 items. The brand represents a functional, value-priced, smart simplicity positioning.
Turning to beauty, a $3 billion business at CVS, the company is leveraging the success of its Healthy Skincare Center concept and has launched a pilot of a smaller format that will enable it to expand the department into more of its stores, Bloom said.
It addition, it will launch in January an ExtraCare Beauty Club, under which customers will receive a 10% “shopping pass” for signing up, $5 in Extra Bucks for each $50 spent on beauty and $3 in Extra Bucks on cardholders’ birthdays.
Gestational diabetes test may predict Type 2 diabetes among women
TEL AVIV, Israel A new Tel Aviv University study found a test used to diagnose gestational diabetes in women could be a key indicator to diagnosing Type 2 diabetes.
The study — led by Gabriel Chodick of Tel Aviv University’s department of epidemiology and preventive medicine at the Sackler faculty of medicine — found that women who "failed" the glucose challenge test, a series of four blood tests conducted over a single four-hour period, have a higher chance of developing adult onset diabetes later in life. Chodick and colleagues collected data on more than 185,000 women in Israel who took the glucose challenge test, then acquired information from the nation’s health registry as to what percentage of these women contracted diabetes later in life.
Chodick noted that nearly half of the women who failed all four parts of the four-part tests, demonstrating an elevated blood sugar level, developed Type 2 diabetes within 10 years. Those who failed 3-of-the-4 tests had a 20% overall chance of developing the disease within the same period. "This is the first-ever study to show the long-term health of those who failed the glucose challenge test," Chodick said.
Gestational diabetes is developed among women while they are about 28 weeks pregnant or later, when the body is not able to make and use all the insulin it needs for pregnancy.
Jonathan Roberts named COO of CVS Caremark’s PBM business
WOONSOCKET, R.I. CVS Caremark has appointed Jonathan Roberts as COO of its pharmacy benefit management business. He currently is EVP Rx purchasing, pricing and network relations, and also now will assume the leadership of PBM operations, mail-service pharmacy and specialty pharmacy.
“Jon is the ideal candidate to fill this newly created role within the PBM,” stated Per Lofberg, president of pharmacy benefit management at CVS Caremark. “His broad base of pharmacy experience will further our mission to continually improve how we do business and look for ways to do it better, more efficiently and at a lower cost.”
Roberts joined CVS/pharmacy nearly 20 years ago and has served in a variety of leadership roles across the enterprise, including SVP store operations at CVS/pharmacy and CIO of CVS Caremark.
“Jon has spearheaded numerous initiatives over the years that have enhanced our delivery of pharmacy care,” added Tom Ryan, chairman and CEO of CVS Caremark. “I am confident that in this newly expanded role Jon will support our PBM growth strategy and overall longer-term success.”