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CVS Caremark attributes Q1 success to Maintenance Choice program

5/5/2009

WOONSOCKET, R.I. CVS Caremark’s first-quarter pharmacy services revenues increased more than 7% thanks in part to the success of its Maintenance Choice program.

“Maintenance Choice offering is really taking off. The number of scripts being filled at retail for 90-day is well over our plan,” Tom Ryan, chairman, president and CEO, told analysts during Tuesday’s conference call.

As of April 1 there were more than 200 clients taking advantage of Maintenance Choice and the feedback has been “extremely positive,” Ryan noted.

Launched in 2008, Maintenance Choice allows consumers to purchase chronic 90-day prescriptions at CVS stores for the same price as at mail.

“Maintenance Choice is profitable to our overall enterprise,” Ryan said.

Revenues in the pharmacy services segment rose 7.2% to $11.5 billion. Adjusting the growth rate for the impact of new generics, net revenues would have grown 11.4% in the pharmacy services segment.

Revenues in the retail pharmacy segment increased 13.9% to $13.5 million. Same-store sales increased 3.3%, while pharmacy same-store sales rose 4.6%. Front-end same-store sales, which were negatively impacted by the shift of the Easter holiday, increased 0.7%.

Net earnings were $738.4 million, or 50 cents per diluted share, compared with $748.5 million, or 51 cents per share, in the year-ago period. Expenses related to the Longs acquisition and the PBM business impacted results.

At the front of the store, the retailer continues to gain share and is strengthening its focus on private label as cash-strapped shoppers look to save money. Private label currently stands at 15.4% of front-end sales, up about 60 basis points.

To further bolster private label sales and attract new shoppers to the segment, Ryan said the company is introducing a new store brand proprietary “try me” section in more than 4,500 stores and is adding more private label product to the mix. The company has introduced 200 new products in the first quarter alone and it expects private label to be about 20% of front-end sales over the next few years.

Within the company’s MinuteClinic, traffic was up 42% on an overall basis during the first quarter, reflecting the company’s efforts to raise awareness by leveraging its retail advertising spend to put messaging in its circulars, implement in-store signage and spread the word through its ExtraCare communications.

The company is also working to bolster third-party insurance coverage and expand service offerings for MinuteClinic. During the first quarter, MinuteClinic added 17 million additional lives to its network. There are now more than 100 million lives in MinuteClinic?s third-party network.

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