Caremark merger proves itself as ‘game-changer’
When CVS merged with pharmacy benefits manager Caremark in 2007, the vertical integration marked a new paradigm for retail pharmacy, and was hailed by Tom Ryan, chairman, president and CEO, as a “game-changing” deal. Now, two years later, that appears to be the case.
The merger transformed CVS into a self-described “pharmacy healthcare service company,” with annual revenue of about $87 billion.
It is no secret that CVS has been hard at work to combine the strength of its retail and PBM services to change the way consumers use their pharmacy benefits, improve adherence and lower the costs for both patients and payers.
Perhaps the most notable initiative is the company’s Maintenance Choice program launched in 2008. Maintenance Choice allows consumers to purchase chronic 90-day prescriptions at CVS stores for the same price as at mail, and has proven to be extremely successful and profitable to the overall enterprise.
During the second quarter ended June 30, there were 270 clients signed up for its Maintenance Choice offering, compared with 200 in the first quarter, and about 25% of the additional clients are new clients to CVS’ PBM.
“The feedback has been extremely positive among the clients that have participated in it or are already using it, and we expect more clients to adopt Maintenance Choice going forward,” Ryan told analysts during the company’s quarterly conference call on Aug. 4.
While still in the midst of the 2010-selling season, the company now has more than 3,000 clients under contract, and its retention rate for 2010 is 96%, slightly higher than 2009, Ryan said.
While overall pharmaceutical growth has slowed, the specialty pharmacy segment continues to explode. However, facilitating a specialty-pharmacy business in a typical community pharmacy setting has been extremely tricky for several reasons, including—but certainly not limited to—the cost of inventories and the high-touch patient requirements. Looking to find a solution, CVS Caremark is piloting a specialty-pharmacy program in Florida that enables customers to pick up specialty-pharmacy prescriptions in any CVS store in the state, as reported in May by Drug Store News. The move not only speaks to the importance of the fast-growing segment in pharmacy, but also provides a glimpse into the future of how the traditional drug store can participate in specialty pharmacy.
“It’s about access and it’s about ease and it’s about low cost, so you have a situation where typically you’d have to call to make sure someone was home as we’re delivering this medication because of the storage requirements, etc. Now they can pick it up in the store,” Ryan told analysts during a first-quarter conference call in May when asked about the growth of specialty pharmacy and the progress of the integrated specialty management program.
Specialty is the fastest-growing piece of the pharmacy business, Ryan said, and he expected that, overall, specialty will grow in the 14% range.
The hub-and-spoke model that CVS is piloting is a glimpse into the future in terms of how the average corner drug store will be able to participate in specialty pharmacy. This participation could manifest as a central-fill type model—such as what CVS is employing, where it will leverage its CarePlus stores and its resources in Caremark to fill specialty prescriptions through its Florida stores—or through some outside network.
CVS Caremark also is leveraging its MinuteClinic business, and has launched injection training around specialty pharmacy.