CVS Predicts Obamacare Will Be Good For Business
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
Company benefits financially from increasing PBM business in third quarter; remains innovative and competitive in an omni-channel world
CVS reported a strong third quarter, with earnings climbing 25 percent because of improving pharmacy benefits management (PBM) business. Revenue for the company increased nearly 6 percent, to roughly $32 billion, and revenue from the PMB side of business rose 8 percent, to $19.5 billion in the quarter. The company expects more growth in the future, regardless of the changes in the healthcare environment being brought about by the Affordable Care Act (ACA), commonly referred to as Obamacare, and private exchanges. Indeed, CVS CEO Larry Merlo says that he expects these changes will only positively benefit the company in the long run.
In particular, the company looks to benefit from the number of people who will soon be, or have already been insured through the Affordable Care Act. CVS recently announced that it built a new state-of-the-art pharmacy processing center. Like many other companies, CVS is recognizing the importance of using cutting-edge technology to more efficiently meet customers’ needs. The company hopes this new facility will streamline the mail-order process. This new facility boasts mile-and-a-half-long conveyor belts that can fill 10,000 prescriptions each hour. Considering how CVS filled 848.1 million 30 day prescriptions in 2012, compared to rival Walgreen’s 784 million, this addition to the company’s list of processing centers will only make it a stronger competitor in the market. CEO Merlo says that health care reform will also aid the company with this mail-order growth. He says, “We’ll also see additional (mail-order) utilization as we begin to see 30 million previously uninsured Americans afforded some sort of coverage.”
While Mr. Merlo has labeled the company as “channel agnostic” in the sense that it doesn’t care whether customers fill their prescriptions in-store or through the mail, CVS has still been actively strengthening its other channels — in particular, the increasingly important online channel. This past spring, CVS introduced an interactive iPad application that uses 3D technology to bring the neighborhood in-store experience to customers through their tablets. Customers can use this new app to refill prescriptions, resting assured that all information is transferred from tablet to CVS.com privately through the mobile app. In addition, the launch of the myWeekly ads program, which took the traditionally print ad circular and made it digital and personalized, proves the company is doing its best to meet its customer’s rising demands for technological innovation.
In addition, the company has strengthened its outreach to millions of customers through its PBM systems. Three years ago, CVS and Aetna announced that they had entered into a 12-year partnership, in which CVS would provide Aetna with its PBM services. This partnership set CVS up to serve roughly 9.7 million Aetna’s customers and members. In the company’s recent Q3 conference call, Mr. Merlo announced, “We have successfully completed the migration of Aetna’s commercial business to the CVS Caremark platform. That’s pretty significant, since it means that more clients will have access to CVS Caremark’s differentiated offerings.”
Merlo says, “We like to think of ourselves as a pharmacy innovation company.” Considering the various technological advancements the company has made, it would seem that the continually growing base of CVS customers will receive their prescriptions seamlessly, through whichever channel they prefer.
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