Merlo to Senate committee: Lowering corporate tax rate can help reduce healthcare costs, bolster economy
WASHINGTON — Lowering the maximum corporate tax rate could allow CVS Caremark to accelerate investments in U.S. jobs, technology and infrastructure — all of which could ultimately help lower healthcare costs and bolster the economy. That was a key message that CVS Caremark president and CEO Larry Merlo had for the Senate Finance Committee during a recent hearing.
Merlo, who appeared July 27 before the Senate Finance Committee during a hearing, "How the Tax Code Affects Hiring, Businesses and Economic Growth," said that the current U.S. tax structure puts companies that heavily reinvest their earnings in core domestic operations, such as CVS Caremark, at a competitive disadvantage. Merlo suggested that changes to the U.S. tax structure are needed to make companies more competitive.
"In order to continue to be successful in an increasingly global marketplace, CVS Caremark must control costs, raise capital and efficiently reinvest its earnings. . . . Our high effective tax rate not only limits the amount of earnings available to us for reinvestment in our core business; it also makes CVS Caremark less attractive to global investors," Merlo testified. "We are committed to growing our business in the U.S. Without a consequential rate reduction, tax considerations will have to be an even more significant component of our overall investment analysis."
Merlo said CVS Caremark is committed to making significant future investments in service offerings, technology, employees and other improvements to the company’s infrastructure and operations. Those investments are geared toward lowering the overall cost of health care and improving consumer health, he noted. He said that a reduction in the corporate tax rate would allow the company to address larger healthcare issues.
"Our company currently reinvests approximately $2 billion back into our business each year, and we are committed to making significant future investments in our service offerings, technology, training, drug adherence programs, retail clinics and other improvements. Our investments are geared toward lowering the overall cost of health care in this country and improving consumer health," Merlo testified.
The hearing was designed to solicit opinions regarding the nation’s corporate tax structure from American business leaders. Also testifying at the hearing were Michael Duke, president and CEO of Walmart; Thomas Falk, chairman and CEO of Kimberly-Clark; and Gregory Lang, president and CEO of PMC-Sierra.
While lowering the corporate tax rate can reduce health care costs and bolster the economy through increasing jobs, it won't. At least not at CVS. Lower tax rates will increase profits, increase shareholder dividends, and increase stock portfolios. All of CVS's PBM subscribers have contracts, many of them with multi-year terms. Customer pharmacy purchases are usually predetermined co-pays set by PBMs, or designed to be a percentage of AWP, neither of which would change because of lowered tax rates. Labor costs would be the same, as a lower corporate tax rate does not effect Medicare or Social Security taxes, and the need for labor in the stores would neither increase or decrease based on a lower tax rate, eliminating the discussion of job creation. The current tax rate has not, in anyway, hindered CVS's growth through purchases like Peoples, Revco, Eckerd, SavOn, Osco, MinuteClinic, Long's, or Caremark. Lowered corporate tax rates would have the same effect lowered very high income tax rates have had, less industry and less jobs. Maybe the Senate should only hear 'testimony' from people who don't have millions of stock shares and options in the company begging for lower taxes.
Retail clinics continue to help healthcare system evolve
WHAT IT MEANS AND WHY IT’S IMPORTANT — Just as National Convenient Care Clinic Week gets under way and healthcare professionals gather in Orlando, Fla., to attend the fourth annual Retail Clinician Education Congress, the convenient care industry continues to evolve as MinuteClinic seals the deal on yet another clinical collaboration and a newcomer prepares to open its doors in Pennsylvania.
(THE NEWS: MinuteClinic enters clinical affiliation with Henry Ford Health System. For the full story, click here.)
As reported, MinuteClinic and Henry Ford Health System have entered a clinical affiliation to connect Henry Ford physicians, as on-call medical directors, to the 10 Southeast Michigan locations of MinuteClinic.
In addition, MinuteClinic and Henry Ford will collaborate on educating patients and helping them to manage chronic diseases. Henry Ford physicians will accept patients who need a level of care that is not provided at MinuteClinic.
This alliance marks the latest such collaboration for MinuteClinic. For example, in June alone, MinuteClinic also announced clinical affiliations with Cleveland Clinic Florida, which is part of the Cleveland Clinic health system, and OhioHealth, a not-for-profit, charitable healthcare organization.
And, of course, Walgreens’ Take Care Health Systems has formed several similar relationships. Among the more recent: a clinical collaboration with Memorial Health for patients in the greater Jacksonville, Fla., region. Such partnerships are important because they further signify that retail-based clinics are more than just clinics; they are bringing providers together in the name of better patient care and improved access.
Meanwhile, WellSpan Health, an integrated health system serving the greater Adams-York County region in Pennsylvania, is planning to open this fall three CareExpress walk-in health clinics in York County, Pa., of which two clinics will be located inside Giant food stores.
WellSpan Health currently operates two WellSpan ReadyCare walk-in clinics that treat such ailments as rashes, cuts and burns and sore throat, and a WellSpan Orthopedics walk-in clinic for sprains, breaks and strains.
However, the new WellSpan CareExpress locations will offer those services found in a typical retail-based health clinic.
Clearly, the convenient care industry is on track for a second wave of expansion.
According to Kalorama Information’s recent report, "Retail Clinics 2011: Market Assessment, Supplier Sales, Key Players and Trends," retail clinic sales have risen dramatically since their inception in 2000. The firm estimated retail clinic sales at $733.4 million in 2010, an increase of 81% per year since 2005. Through 2015, sales are expected to continue expanding, rising by 19.3% per year to reach $1.7 billion.
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