He has reshaped the company during his tenure as president and CEO.

WOONSOCKET, R.I. — Few executives have had the impact on the chain drug industry that Larry Merlo has had. But as he gets ready to retire after a career spanning more than four decades, framing his accomplishments within the retail pharmacy alone — as enormous as they are — would be limiting.

Larry Merlo

Merlo, who has served as president and chief executive officer of CVS Health since 2011, helped reshape the company, most notably in leading the merger with Aetna — and, in doing so, not only transformed the retailer into a health care enterprise but created a blueprint for what the health care landscape might look like in the future.

For this, as well as the many other ways in which he has left an indelible mark at CVS and on the industry as a whole, Chain Drug Review is honoring Merlo with its Lifetime ­Achievement Award.

Merlo began his career at CVS 40 years ago as a community pharmacist, and during his time with the company he worked his way up the ladder to the top rung. Though he steps down on February 1, he will continue to serve on the board of directors until the company’s next annual meeting in May, and will remain as strategic advisor to assist with the leadership transition until his official retirement on May 31. He will be succeeded by CVS Health executive vice president and Aetna president Karen Lynch.

Aetna

With CVS’ shift from a drug store operator into a multifaceted organization through the Aetna deal — perhaps Merlo’s master stroke as CEO — the company’s reach now extends to most aspects of health care and impacts more than 100 million people a year. Of course, CVS had already established itself as a company willing to make bold moves — the acquisition of one of the country’s largest pharmacy benefit managers, for example — prior to Merlo’s tenure as CEO.

In 2018, under Merlo’s leadership, CVS purchased Aetna, one of the nation’s top health insurance companies, for $77 billion. The acquisition moved the company significantly closer to Merlo’s vision of being able to offer consumers an integrated health care ecosystem providing 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 put CVS in the position that it enjoys now — a company that not only continues to reshape health care, but in many ways is reinventing it.

In marshalling the Aetna merger, Merlo helped to combine an arsenal of assets from both companies — Aetna’s traditional, consumer-directed health insurance products that served 39 million people, along with a growing Medicare Advantage business and analytics capabilities and CVS’ more than 9,000 drug stores, 1,100 plus walk-in clinics, a PBM with some 93 million patients, and long-term-care and specialty pharmacy units — to create a health care juggernaut.

“This is a transformative moment for our company and our industry,” said Merlo of the Aetna deal, which he described as creating a “new, innovative health care model that is easier to use, less expensive and puts consumers at the center of their care.” He noted that CVS and Aetna together as one company would engage consumers with “the quality care they need when and where they need it, will make a complicated system simpler for all, and will help people achieve better health at a lower cost.”

Merlo added that joining forces with Aetna also meant advancing solutions to meet the needs of consumers not being filled — solutions to improve “the experience for consumers and patients and provide them access to what they need where and when they need it.”

And with Lynch taking the reins from Merlo, the vision Merlo has seen come to fruition will surely continue as Lynch, who came to CVS as part of the merger, shares Merlo’s focus on health care being a customer/patient-centric enterprise, will no doubt expand on what Merlo has built.

Caremark

But even before Aetna, Merlo’s contributions stand out. His first major accomplishment as the company’s chief executive was overseeing the integration of Caremark, the PBM purchased by CVS for $26.5 billion.

Initially, CVS 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, who had already established a reputation for his skill at absorbing and assimilating other drug chains, held firm on his vision and revitalized Caremark, putting CVS on course to generate strong, sustained financial results.

With the Caremark integration operating smoothly, Merlo turned his attention to finding new ways to maximize the impact of pharmacy and leverage the CVS network of 9,900 drug stores to deliver care in the communities where people live and work.

Walk-in medical clinics, for example, were a key part of that strategy and now provide patients access to nurse practitioners with a pharmacist in one convenient location. This solution on the part of CVS — with Merlo at the helm — addresses the persistent problem of access, quality and cost that continue to plague health care in America.

HealthHUBs

HealthHUBs make the much discussed evolution of the drug store into a neighborhood health care center a reality.

Merlo’s determination to make health care more consumer-centric gained momentum with the opening of the first CVS HealthHUBs. After successful pilot locations, CVS introduced 15 HealthHUBs in greater Houston in January 2020 as part of the company’s strategy to scale the program nationally with plans to have up to 1,500 locations operating throughout the U.S. by the end of this year.

The format 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.

Throughout his career and in particular during his role as CEO, Merlo has been on the cutting edge and has done as much as anyone in fostering a new paradigm and transforming CVS Health from a traditional drug chain.

A pharmacy innovator

In 2015, for instance, two other CVS deals are worth noting, as they further highlight Merlo’s impact on the industry and the arc of CVS’ growth during his tenure. In May 2015, CVS agreed to pay $12.7 billion for Omnicare, the nation’s leading provider of pharmacy services to assisted living and long-term-care facilities. Then, just a month later, CVS announced that it would buy Target Corp.’s pharmacy business for $1.9 billion, and operate its 1,660 prescription counters, along with 80 health care clinics, using a store-within-a-store format.

“Both acquisitions were extremely important as we think about our priorities, where health care is headed and the opportunities that this creates for us going forward,” Merlo said at the time. “The Target acquisition expanded our pharmacy presence by about 20%, including markets where we’re weren’t well represented, places like Seattle, Portland, Denver and Salt Lake City. It also allowed us to increase our presence in existing markets, where we’ve been operating for less than 10 years. Minnesota, where we essentially doubled our pharmacy count, is a perfect example of that. So the deal was extremely important in that regard.”

Kicking tobacco

Another signature event during the Merlo years, and one that more than any other exemplifies the commitment of Merlo and his team to put the health of the consumer first — even though it significantly cut into the company’s bottom line — was the decision in 2014 to stop selling cigarettes and other tobacco products.

The move — the first national chain to take such action — was applauded by President Barack Obama and drew praise across the pharmacy and medical communities.

“Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health,” Merlo said at the time. “Put simply, the sale of tobacco products is inconsistent with our purpose.”

Coinciding with CVS’ historic action, an article in the Journal of the American Medical Association Viewpoint stressed the importance of the tobacco ban from CVS shelves and highlighted not only the paradox of selling such a toxic product in a pharmacy, but underscored the expanding role of retail pharmacy in delivering health care.

Ending sales of cigarettes in 2014 and purchasing Target’s pharmacies for $1.9 billion are part of Merlo’s legacy.

The fact that the decision cost CVS an estimated $2 billion a year in tobacco sales — as well as the foot traffic those sales produced — gave credibility to Merlo’s vision of transforming CVS into a destination for health and wellness. A subsequent CVS study found that pulling tobacco from its stores resulted in a reduction in cigarette sales of nearly 100 million packs across all retailers during the first eight months following the move. Assuming a similar impact since then, the company has been the catalyst for a half-billion pack reduction in cigarette consumption in the last five years.

Since then, CVS has adopted smoking cessation programs, and in September 2019, just five years after getting rid of tobacco products, CVS expanded its focus on helping people quit smoking.

Be The First is a five-year, $50 million dollar CVS initiative in conjunction with the CVS Health Foundation with the lofty goal to help create the first tobacco-free generation. The program not only aims to help smokers quit, but to keep them from smoking in the first place, while it also tackles the growing challenge of youth vaping with additional investments and new partners, such as Discovery Education and the National Medical Association.

“Five years ago, we knew exiting tobacco was the right thing to do for our company and for the health of our customers and the communities we serve,” said Merlo. “But our decision to eliminate tobacco was just the start. As a health care company now combined with Aetna, we continue to take bold steps to develop and deliver innovative solutions for the communities we serve, one individual and one community at a time.”

Presidential recognition

In January 2015, Merlo sat in the gallery of the House of Representatives as a guest of Michelle Obama listening to the president deliver his State of the Union address. Merlo was invited to the event and asked to sit in the first lady’s box in recognition of CVS taking the lead in ceasing sales of cigarettes and tobacco products.

Merlo stated that the tobacco ban struck a chord with the public. “I think everyone could relate to the effects of tobacco and how it may have affected a family member or a loved one.”

In his remarks, Obama said: “Tonight, I’m also asking more businesses to follow the lead of companies like CVS and UPS and offer more educational benefits and paid apprenticeships — opportunities that give workers the chance to earn higher-paying jobs even if they don’t have a higher education.”

In a recent interview, Merlo said that the delivery of health care is “changing before our eyes, and we are excited to be in the vanguard of that change.”

With a physical presence in almost every community across the U.S., CVS Health has the unmatched ability to meet consumers where they are and provide the care and services they need, be it face to face or with the unique set of virtual and physical delivery service capabilities that extends the company’s physical presence in real time. And much of that is due to the leadership and vision of Merlo and the culture he established during his tenure.

His is a legacy that will surely last.