Focus on digital engagement is a key to success.
WOONSOCKET, R.I. — With the appointment of Neela Montgomery as president of its retail pharmacy business late last year, CVS Health gained a fresh perspective. With a varied background that includes experience at Crate & Barrel Holdings, the home furnishings retailer where she served as CEO, and Tesco PLC, a U.K.-based purveyor of food and general merchandise, Montgomery was quick to grasp the central role of drug stores in the U.S. — and their untapped potential.
The area with arguably the greatest opportunity, and the one where Montgomery is expected to make an immediate impact, is CVS Pharmacy’s digital and omnichannel offerings. That part of the business received an unexpected boost from the COVID pandemic, and she is determined to build on those gains.
“I’m very passionate about digital; look, you’re not in retail unless you think with a digital-first mindset these days,” says Montgomery, who worked in e-commerce, among other departments, at Tesco, and enabled Crate & Barrel to generate 50% of its volume online. “The reality is most customers are searching for what they want before they get to your store. And while CVS already had a five-star-rated mobile app, COVID testing and vaccination has offered this very unique opportunity for people to create accounts, engage with the brand digitally and then have a true omnichannel experience.
“So for us, it’s really about how do we now take this incredible engagement with our brand — our digital engagement was up 80% in the first quarter — and translate that into a behavioral change. How do we get people to see us as a digital destination for product, services, content and community? And how do we take our incredible health authority and enterprise assets, and really pull those through into the digital experience? That’s the bigger mission. In the meantime, there are also a lot of simple things that we can do to improve the experience for our customers.”
The recent enhancement of CVS Pharmacy’s CarePass membership program — which for $5 a month gives participants access to a round-the-clock pharmacist helpline, 20% off CVS brand products, free one-to-two-day shipping on CVS.com, and a $10 promotional reward every month — is a case in point. The 5 million CarePass members will now be able to have prescription orders delivered within hours free of charge through an expanded partnership with Shipt.
“Using our incredible convenience footprint for more of our digital product is also going to be an important thing moving forward,” says Montgomery, who acknowledges that the increasing shift toward omnichannel among consumers will have an effect on stores.
“I’ve been on this journey before with other retailers,” she says. “It doesn’t necessarily mean that you have fewer stores in mind, but it means that the role of the store is different. Life is full of different circles. Previously you used to build a huge e-commerce centralized automated warehouse. Now everybody wants to do microfulfillment.
“I didn’t think we should assume that stores will not play an important role, even if increasingly we fulfill digitally or through e-commerce. One of the interesting things we’ve seen in the last 12 months has been the incredible growth of curbside pickup and ship from store.”
Montgomery’s expertise in the omnichannel realm hasn’t been an impediment to understanding the importance of brick-and-mortar pharmacies. Another lesson of the pandemic is just how essential the stores are to the delivery of community-based health care.
“I’ve lived in five different countries, and in each one of them the pharmacy plays a slightly different role, it has a slightly different configuration,” says Montgomery. “So it’s been really exciting and humbling to see how important pharmacies and pharmacists are, and how many people really rely on them.
“We talk a lot about how pharmacy is the most common health care interaction. I actually spent some of my early days at CVS working in our pharmacies, and it’s amazing to see how many questions our pharmacists get asked. There’s a real rapport, warmth and professionalism to that relationship that I’m proud to be involved in.”
One of the things that attracted Montgomery to CVS Health — where, in addition to serving at president of CVS Pharmacy, she is a corporate executive vice president — is the opportunity to transform health care delivery, which she sees as “an incredibly important mission.” With health care accounting for 17.7% of the U.S. economy, Montgomery’s thinking is aligned with the efforts of CVS Health CEO Karen Lynch to help drive down costs, while at the same time improving access to quality care. The company’s nationwide network of more than 9,900 drug stores is an essential element in that work.
“Over the last few years, we have been pivoting more to health and wellness and beauty categories, and clearly now services. That journey will continue,” Montgomery says. “Things like testing and vaccination will be very important. The fact that we were able to stand up this incredible COVID business in the course of 12 months was all because of our footprint and reach in the community. We’ve administered 22 million tests and 17 million vaccines. That is extraordinary.
“We must continue to think about how health care services are going to evolve and be delivered in the community, and how we can expand those services. CVS HealthHUBs and MinuteClinics will be really important in that process moving forward, but we also need to focus on how the role of pharmacists can evolve so that we can free them up to operate at the top of their license.”
By leveraging those assets, in tandem with the broader capabilities of CVS Health (which include Caremark, a pharmacy benefits manager, and health insurer Aetna), Montgomery is confident the company can help patients and payers improve their return on investment in health care.
“Probably the most exciting part of what we’re trying to do is to demonstrate that we can create this new integrated community care delivery model, and derive financial value from it,” she explains. “By having those earlier interventions, we can prevent more expensive health care interactions later on. That’s quite a complex model to prove out.”
The emerging paradigm is exemplified by CVS HealthHUBs. Now numbering around 800, the facilities offer acute and chronic care delivered by nurse practitioners. HealthHUB patients can obtain about 80% of the services traditionally handled by physicians.
“It is really interesting as I start looking at what’s going on in our stores,” Montgomery says. “For example, the pharmacy panels where an Aetna customer walking in can get a personalized consultation from the pharmacist. There is no question that drives better adherence, better post-discharge behavior and lower medical costs over time. And there is value in that. Having multiple services around the pharmacy with our HealthHUBs and MinuteClinics can prove out that integrated value proposition.”
New concepts are tested on a regular basis. One trial now under way at select HealthHUB locations entails mental health care delivered by clinical social workers.
“We’ve launched a behavioral health pilot because there’s a scarcity of these services, especially in the communities that need them most,” says Montgomery. “One thing that’s highly valued by patients is access, the fact that they can get in to see somebody within a week, which apparently is virtually impossible otherwise. Convenience is another big factor; 20% of those visits have been virtual. So there’s also the kind of omnichannel play.”
The company’s positioning as, first and foremost, a health care provider and the experience of the COVID pandemic are two other forces that will influence the evolution of CVS Pharmacy’s business.
“With vaccination, about 50% of the people coming in haven’t used CVS Health in the last 12 months,” Montgomery says. “So that’s a new health care experience that a lot of people are having with us. I’m fairly confident that this is going to prove to be an important moment for CVS as a brand and as a company. We should be able not only to attract new customers, but to change how people might think about us as not somewhere you come to just get a Diet Coke and some Nurofen [ibuprofen], but somewhere that you come to access health and wellness services. Because there are a number of younger people who probably don’t experience our pharmacy day-to-day.”
The front-end assortment reflects that orientation. Over-the-counter medications and beauty and personal care are emphasized. Decisions about the mix in other categories, convenience food and beverages, are influenced by the company’s overarching purpose.
“The pandemic has really accelerated people’s interest in health and wellness,” Montgomery says. “It continues to be a huge growth category — about $4.5 trillion globally. Whichever way you cut it, it’s one of the fastest-growing share-of-wallet sectors. The front of the store really is an opportunity for us to evolve into more proactive wellness solutions, and continue to create new brands and products in that space.”
CVS Pharmacy is taking on an increasingly curatorial role with initiatives like Tested to Be Trusted. The program mandates third-party testing of all vitamins and supplements to confirm the accuracy of the ingredients listed on the label and to establish that the products are free from certain additives and ingredients.
“That’s important because the vitamins and supplements world is a very confusing space, and our brand has a huge amount of trust in it,” says Montgomery. “We want consumers to be confident in the more than 1,500 products we sell in that space.
“Another example of our commitment to health and wellness is Live Better by CVS Health. The brand focuses on on-trend wellness products, everything from fermented beet to turmeric to melatonin, all made with very highly responsibly sourced ingredients and recyclable packaging. These are important wellness trends for CVS to be engaged with.”
In the future, CVS Pharmacy intends to leverage the ExtraCare loyalty program and increasingly sophisticated digital tools to personalize interactions with customers. That work will be critical to the retailer’s success, particularly, according to Montgomery, where health and wellness intersects with categories like beauty care.
“When you talk to consumers about CVS, the two things that come through strongest are, first, our credibility in health care and, second, the loyalty program,” she says. “People really love ExtraCare. There are 22 million customers who are actively engaged in it.