Retail News Breaks Archives
Analysis: Merlo unlocks CVS Caremark's potential
June 11th, 2012
by David Pinto
WOONSOCKET, R.I. – Larry Merlo’s initial year as chief executive officer of CVS Caremark Corp. has been a remarkable one, indeed.
Not that you’d notice if you confined your examination, analysis and interpretation to the CVS drug store chain. His true contribution has come from his efforts to transform the Caremark pharmacy benefits manager from a CVS appendage to an integral part of the corporation, one that provides a very real benefit for both the drug chain and the corporation of which it is a part, while arguably transforming Caremark into the most compelling PBM in America.
Merlo has accomplished this stunning feat by (1) taking the time to learn the PBM business, (2) understanding both the realities of the marketplace and the limitations and possibilities of combining a PBM with a drug chain, (3) putting in place a group of senior managers with a grasp of what Caremark was and what it could become, and (4) encouraging that group to develop programs that would benefit the company’s PBM clients by exposing them to the health care services provided by both the drug chain and the company’s immediate care clinic unit.
A major breakthrough for Merlo was understanding that his company comprises not two but three components, and that each would be more valuable when combined with the other two. The third component is, of course, MinuteClinic, the soon-to-be-1,000-unit immediate care chain that has morphed from a facility largely devoted to acute care patients to one equally comfortable serving chronic care patients.
Three other realities came clear to Merlo early on. The first was that the serious shortage of physicians is not likely to improve anytime soon. The second — and key — realization was that patients would respond to any offering that could promise easily accessible health care at affordable prices. The third was the understanding that CVS Caremark could best offer accessible health care at affordable prices by utilizing all three of its components.
Having laid out this blueprint, Merlo has, over the past year, installed programs to make it work in practice.
To that end, CVS Caremark has launched:
• Maintenance Choice, a program that offers Caremark customers the option of getting a 90-day supply of a prescription drug either through the mail or at a CVS drug store, with one important departure — both options are available at the mail-order price. An added benefit for Caremark patients who choose to fill their prescriptions at a CVS drug store is the opportunity to get personal health care counseling by an in-store pharmacist, rather than being advised by an impersonal voice on the telephone.
At year’s end, some 10 million lives were enrolled in Maintenance Choice, with at least that many more expected to join the program as the latest version is rolled out.
• Pharmacy Advisor, a medical condition-based program that alerts pharmacists in the stores and in the call centers that are part of the Caremark program, as well as the nurse practitioners who staff the MinuteClinic facilities, to both patient noncompliance and perceived gaps in the medical care that a patient is receiving. The program was initially rolled out to some 12 million Caremark members, including 700,000 diabetes patients. Significantly, in its first six months the program produced over a million patient interventions, the heavy majority of them the result of the diligence of in-store pharmacists. As a result, almost half a million gaps in care were reportedly uncovered, while a patient’s previously prescribed medication was adjusted over 100,000 times.
To further mesh the possible synergies among the three CVS Caremark units, the MinuteClinic model was adjusted to more nearly reflect the range of medical services most patients require. CVS executives estimate that such chronic care services as monitoring for diabetes, hypertension, asthma and high cholesterol, as well as offering a range of vaccinations and inoculations, will account for some 25% of all visits to a MinuteClinic facility within three years, at which time some 1,000 clinics are projected to be open.
Atop this, the company is launching a new program that will offer Caremark clients the opportunity to significantly reduce or totally eliminate co-pays at MinuteClinic facilities. Finally, the organization is testing the concept of offering Caremark clients access to on-site immediate-care clinics.
Combining the three once disparate CVS Caremark units has even now produced a variety of benefits for the company’s 60 million Caremark members, primarily by improving access to health care while significantly lowering its costs. Indeed, the company claims that in the course of a year MinuteClinic patients paid almost 10% less for health care than those patients who didn’t use MinuteClinic.
But the past, as they say, is prologue. Over the next months CVS Caremark is set to sharply expand the range of MinuteClinic services available to Caremark clients while putting a greater emphasis on such wellness-oriented services as vaccination programs and physical examinations. As well, the nurse practitioners who staff the immediate-care facilities will become more active in providing screening services designed to detect the onset of disease.
At that same time, CVS Caremark is forming partnerships with individual hospitals and physicians with the object of sharing health care records and other medical information, again with the object of learning more about a patient’s health more quickly.
These efforts appear to be paying significant dividends. The company is producing healthy revenue increases — including a 19.9% gain to $30.8 billion in the first quarter — and its PBM unit is said to have generated some $7 billion in new revenue last year while retaining 98% of its customers.
But perhaps Merlo’s most impressive accomplishment lies in CVS’ success in lowering costs while improving health care outcomes.