CVS / Caremark / MinuteClinic Article and Comments

I will stick with Drug Store News (Nov. 12, 2007) for now.  They had a good long story on the CVS Caremark acquisition building momentum.  They also talk about MinuteClinic which was a separate acquisition by CVS.  As I have said for a while, I think this was a good move.  It creates a lot of opportunity.  The combined entity now has touch points at several stops along the care continuum.  The question (of course) is how to capitalize on this without compromising the core businesses and without making people feel to “controlled” along the path.

From a top down view, the biggest things that jump out at me are:

• How to expand the care model at the retail pharmacy using MinuteClinic.
• How to get patient’s to grant access to share data across business units (PBM, retail pharmacy, MinuteClinic).
• How to provide Medicare Part D type services like MTM (medication therapy management) through MinuteClinic facilities (even if the pharmacist were coming over to use them).
• How to “value” each patient and determine the optimal mix of services and facilities for them.  For example, if they don’t impulse buy, you might as well get them to use mail.  Or, if they have a lot of maintenance medications that are generic, but they tend to buy a lot of other goods at retail, you might want to pre-fill their prescriptions at mail and ship them to the retail store for pick-up.  Or, if they have kids, you may want to encourage them to use the CVS that is an extra 2 miles away because it has a clinic.

Here are a few things from the article:

• “So far, the moves are paying off as the company already has realized $660 million of cost savings and continues to anticipate about $1 billion of revenue synergies to be achieved by the end of 2008, with the later coming primarily as it rolls out new PBM offerings” (from Lehman Brothers analyst Meredith Adler in a research note)
• Chris Bodine was named president of CVS Health Services earlier this year which is where the PBM and MinuteClinic business report up through [by the name of the group it would imply that there are more things to come once they digest these deals].
• There hasn’t been much about what these new PBM offerings will be, but Tom Ryan (President and CEO) talked about them actively working and trying things that are “integrating our PBM capabilities with our strong consumer connections through our retail business”.  A few opportunities mentioned in the article are:
  • Therapeutic Interchange – [If the retail POS (point-of-sale) system can deliver formulary alternatives to the pharmacists, CVS should be able to help their PBM customers make different decisions to drive formulary compliance (rebated brands and generics) while lowering patient’s copayments.  This would be a big deal to plan sponsors and patients.]
  • Flexible Fulfillment – They talk about allowing traveling patients that use mail to get short fills at retail.  [I think some retail-at-mail solution here will be more creative.  They could do central fill which is a concept where scripts are filled at a mail order facility and delivered to the retail pharmacy for pick-up.  They could split scripts to fill a 7-day at retail and the remaining 83-days at mail (depending on their cost structure).  There are lots of trade-offs here around whether they want foot traffic (for cross-sell) or not.]
  • Specialty at Pharmacy – CVS retail stores fill about $3B worth of specialty prescriptions (think about injectible drugs and drugs that are very expensive).  But, most people want more support and move to a dedicated specialty pharmacy.  [I am not sure of the economics and logistics of storing specialty medications across a broad retail base versus simply using retail as a referal source for their specialty pharmacy.  Now, some specialty drugs are still shipped directly to MDs and billed under a different fee schedule on the medical side.  If they could use MinuteClinic as a dispensing location for specialty drugs, they could offer a convenient service to patients, lower costs for their clients, and gain visibility into drugs being coded as medical services.]
  • MinuteClinic is in the process of creating a pilot program to monitor health assessments and screen for illness just for PBM clients.  [If they could figure out a way to offer preventative care, they might be able to figure out how to take risk.  It would be a powerful story to offer clients a service that bore risk around spending, trend management, and overall care / outcomes.  With a few other acquisitions or partnerships, they could begin to look very different.]
  • Corporate Clinics are briefly mentioned.  [This is another interesting pitch for me.  If you put a MinuteClinic on-site at many of their large corporate clients and/or in areas where they have a dense population, they could provide health services and use the clinic to “steer” (as legally allowed) patients to CVS, mail-order, or their specialty pharmacy.  For companies, this increases their stickiness to CVS on the PBM side while reducing time away from work for their patients.]
  • One-third of their PBM business is up for renewal in 2009 [so they have about 6-months to demonstrate the uniqueness of this story to those clients to easily renew them without major price concession.  As I sure their competitors will be focused on conflicts of interest, too much turmoil, and other FUD (fear, uncertainty, and doubt).]
  • On a fairly different note, another article about CVS talks about their new advertising campaign focused on women as caregivers including a new website for people to share personal stories.  (www.ForAllTheWaysYouCare.com)   The initiative seems to have an impressive group of panelists.