CVS & Walgreens Adapt
CVS & Walgreens, like independent retail pharmacies, are facing immediate pressure from all fronts: reimbursements from PBMs, retail sales from Amazon, and losing volume to growing mail-order pharmacies (Amazon/PillPack, PBM pharmacies). As such, they have adopted a few different strategies to ensure they survive and, if all goes well, thrive.
This event concretely demonstrated the power that PBMs hold over their downstream pharmacy partners.
CVS Caremark holds the silver medal in Mail/Specialty Pharmacies with $38.6 billion in annual revenues, behind Express Scripts, the largest Mail/Specialty Pharmacy, with $44.8 billion in annual revenues, per Drug Channels Institute. As Cigna, Humana, and other industry titans make moves, that volume could prove to be a liability, more so than an asset.
Adaptation and Improvisation
Next Day Delivery (Amazon + PillPack)
CVS Labeling (PillPack)
CVS & Aetna (Defense)
CVS retail store can be exclusive/preferred for retail drug dispensing on Aetna plans
CVS Specialty can be exclusive/preferred for specialty drug dispensing on Aetna plans
CVS MinuteClinic® can be exclusive/preferred for telehealth and some primary care services on Aetna plans.
Caremark builds out massive knowledge base on intricacies of insurance plan and payor operational dynamics
CVS can acquire a Medical Benefit Manager and leverage knowledge/experience of PBM into managing the healthcare benefit.
CVS Health Services (Growth)
Managing five common chronic conditions — diabetes, cardiovascular disease, hypertension, asthma, and behavioral health.
Optimizing and extending primary care, including to expand the scope of services available at CVS’ MinuteClinics to help identify and manage chronic diseases.
Reducing avoidable hospital readmission by combining Aetna’s clinical programs with CVS’ stores to guide patients when they’re discharged.
The new profit and revenue stream will allow the company to be less dependent on General Retail although increased traffic would bode well for Retail Pharmacy, CVS Specialty and General Retail segments.
Walgreens Partnerships (Growth)
Additionally, Walgreens has partnered with Humana to develop senior clinics, exactly inline with CVS’s MinuteClinic efforts. The clinic will be designed to complement the prescriptions and pharmacy services offered at Walgreens with Humana’s “Partners in Primary Care” center.
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