Merlo extended CVS’ health care reach

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The evolution of CVS Health during Larry Merlo’s tenure as president and chief executive officer has been truly remarkable. Merlo, who earlier this month announced that he will retire on February 1 after a decade in the job, guided the transformation of the company from a drug store operator — albeit one that had, three years before he was named CEO, taken the bold step of acquiring one of the nation’s largest PBMs — into a multifaceted organization whose reach now extends to most aspects of health care and impacts more than 100 million people a year.

Larry Merlo

Larry Merlo

Merlo’s first major contribution as CEO was to make the integration of CVS and Caremark, the PBM that the former purchased for $26.5 billion, work. A master at absorbing and assimilating other drug chains, CVS initially struggled to integrate Caremark with its existing business, leading some to assert the PBM threatened to drag down CVS and call for its divesture. Merlo stood his ground, revitalized Caremark and put CVS on course to generate strong sustained financial results. (As Barclays Capital Inc. analyst Steven Valiquette noted during CVS’ recent third quarter earnings call, the company has met or exceeded initial EPS guidance every year since 2011.)

With the business running smoothly, Merlo, who began his career as a pharmacist, turned his attention to finding new ways to maximize the impact of the profession and leverage CVS’ network of 9,900 drug stores to deliver care in the communities where people live and work. Walk-in medical clinics are a key part of the strategy, giving patients access to nurse practitioners with a pharmacist in one location. In so doing, CVS took direct aim at the persistent problems of access, quality and cost that bedevil health care in America.

Merlo’s determination to make health care more consumer-centric intensified in 2019 with the opening of the first CVS HealthHUBs. The format — which is slated to be rolled out to 600 locations by the end of 2020, with plans for 900 more in coming years — is designed to provide a differentiated patient experience by offering a broader range of health and wellness products and services, along with an intense focus on personalized care, than are traditionally available in a retail pharmacy. HealthHUBs make the much discussed evolution of the drug store into a neighborhood health care center a reality.

Merlo pursued the benefits of extending the continuum of care on a macro scale when CVS bought Aetna, one of the nation’s top health insurance companies, for $77 billion in 2018. The acquisition moved the company significantly closer to being able to offer consumers an integrated health care ecosystem, one that promises to provide high-quality care in a cost-effective way. In remaking CVS, which ranks fifth in the Fortune 500 with more than $250 billion in annual revenue, Merlo and his colleagues are helping reinvent health care.

With the appointment of Karen Lynch to succeed Merlo, the company is expected to adhere to the vision it has pursued for the past decade. As a CVS Health executive vice president and Aetna’s president, Lynch, who came to the company when it merged with the insurer, has exhibited an intense focus on the customer.

“We’re trying to transform a health insurance company into a consumer engagement company,” she said of Aetna in an interview with Chain Drug Review last year. “That’s where we’ve really been making a shift, even before the CVS acquisition.

“Aetna is trying to become a much more consumer-based company, and that’s why the combination of CVS and Aetna is so powerful, because obviously CVS is a very consumer-based company, and we really have the ability to engage members in a different way. Obviously people need insurance as a financing mechanism, but what we’re trying to do is go beyond insurance and think about health engagement.”

Lynch’s influence can be seen in many of the innovative programs Merlo singled out in the recent conference call with financial analysts. To cite just one example, Aetna Connected, which was recently launched in greater Kansas City and is now being expanded to Texas, brings together a wide range of CVS capabilities at what he characterized as “market-leading affordability.”

Lynch is ready to build on Merlo’s legacy and reimagine how the company’s resources can be deployed to improve health care. “We’re on a mission to reshape health care as we know it today,” she says. “Our strategy is rooted in meeting consumer expectations as we work to address every meaningful moment of health in a person’s life. Our unmatched assets allow us to offer greater convenience and services that are personalized to an individual’s unique needs.”

With Lynch at the helm, Merlo should be confident that the company he has done so much to build will continue to flourish.



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