CVS Health's Merlo reiterates strengths, talks health and beauty at J.P. Morgan Healthcare Conference
WOONSOCKET, R.I. — In speaking on Tuesday at the 33rd Annual J.P. Morgan Healthcare Conference, CVS Health president and CEO, Larry Merlo, reiterated the company’s success in building a one-of-a-kind company with unmatched, integrated assets that is bringing differentiated solutions to market and outlined how the company is working to become a leading health and beauty destination.
“We are still the only company with the ability to impact consumers, payors and providers with innovative, channel-agnostic solutions. Products like Maintenance Choice, Pharmacy Advisor and now Specialty Connect they remain unmatched in the marketplace,” Merlo told investors during the presentation, which was also webcast.
In looking at the PBM business, CVS Health kicking off 2015 with 6.6 billion in gross new business, which includes 3.2 billion net new business. The retention rate stands at 96%.
Meanwhile, the company’s broad specialty capabilities are paying off in a big way as the company generated roughly $31 billion in enterprise specialty revenues this past year. That number is expected to grow to about $37 billion this year.
Another critical asset within the enterprise is the company’s MinuteClinic business. Merlo said the company now operates 960 clinics, and over the past two years has opened more than 340 clinics while entering 20 new markets. The goal is to operate 1,500 clinics by 2017.
In addition to the ongoing clinic growth, the company is also expanding its scope of services. Along with preventative and acute care services, MinuteClinic is also looking to provide chronic condition monitoring and various wellness programs.
As the company announced during its Annual Analyst Day in early December, the company is strengthening its focus on health and beauty.
Merlo said the company is focused on five key themes to position it as a leading health and beauty destination and further fuel front-store growth. As outlined by Merlo, the five themes are:
• Better Health Made Easy: “We are already a leader in OTC health but we wanted to do more in our core health categories and this means expanding our OTC selection, elevating our health presence, making OTC an integral part of the adherence and post-care support. We will also provide customers more on-the-go healthy food choices to better meet their needs and drive frequency of trips,” Merlo told investors.
• Elevate Beauty: “We will leverage our enterprise assets to enhance the beauty experience. We will continue to launch new and exclusive brands and bring the look and feel of our beauty offerings up market to create an accessible look and feel,” said Merlo. “And you’ll see as we go forward a tighter enterprise integration in beauty with more clinical solutions and services.”
• Customer-Driven Personalization: “We will continue to leverage our industry-leading ExtraCare loyalty program to deliver personalized offers to more than 70 million active members that drive profitable sales,” said Merlo. “We now have more than 16 years of history and that gives us an awful lot of longitudinal data that enables us to do things our competitors simply can’t.”
• My CVS Store: “Over the next 10 years the Hispanic population is expected to grow by almost 15 million and from our recent acquisition of Navarro, a leading Miami chain with deep knowledge and expertise serving the Hispanic market, we are well poised to capture and take advantage of this opportunity,” Merlo said.
• Digital Innovation: “We will continue to expand not just the traditional dot-com sales but industry-leading digital tools and experiences that enhance the customer interactions,” Merlo told investors.
An Evolving Market
In wrapping up his presentation, Merlo took a look ahead to touch upon four ways in which he believes the healthcare market is further evolving —
• Over the past year, reform has expanded insurance coverage to millions of Americans but there is still much opportunity for future growth as lives move to Exchanges and Medicaid continues to expand. Furthermore, the aging population will continue to drive script utilization.
• The payor mix is shifting with health plans growing in importance. In addition, plan sponsors continue to seek solutions to curb specialty growth and manage their pharmacy spend.
• Consumers will take a more active role in their healthcare decisions.
• Providers will form strategic alliances to share both the risk and the upside of providing healthier outcomes with greater cost efficiency. Merlo noted that, with the growing focus on population health, there has been an increased desire among physicians to increase coordination with their patients’ pharmacists.