CVS Caremark Corporation

Company Overview

CVS Caremark Corporation (CVS) is the largest pharmacy health care provider in the United States. As the leading Pharmacy Benefit Manager, the corporation provides sponsors of health benefit plans and participants with services of a network of pharmacies including more than 7,400 pharmacy stores (Form 10-K). Its annual revenue accounts to more than $123 billion (Form 10-K, 2012). The company’s rank is 18th on the 2012 FORTUNE 500 list by Fortune magazine that annually ranks the U.S. companies by revenue.

Brief History

The history of the company started from just one retail store opened to sell health and beauty products in Lowell, Massachusetts, in 1963. Later, the fast growing company became a division of Melville Corporation through its acquisition. By1980, CVS/pharmacy reached the 15th position in the list of the largest pharmacy chains in the U.S. (CVS Caremark, n.d.). Further Melville Corporation restructuring led to creation of a standalone CVS Corporation trading on the stock exchange. The next important step in the company’s history was creating CVS Caremark Corporation through its merger with Caremark RX in 2007 (CVS Caremark, n.d.). This merger has transformed the company into the nation’s integrated provider of health care services and prescriptions. At present, the company operates more than 7,400 facilities in 45 states and has more than 400 million customers (Form 10-K, 2012).

A General Description

The major business groups.CVS is divided into two major business segments: Retail Pharmacy and Pharmacy Services.

Retail Pharmacy. CVS/pharmacy, the retail division of the corporation, is leading retail pharmacy in the U.S., which has more than 7,400 retail drugstores, online retail pharmacy website, onsite pharmacy stores and 640 retail health care clinics under the MinuteClinic name (Form 10-K, 2012). MinuteClinic is the leader in retail medical clinics with more than 13 million visitors (Form 10-K, 2012). The retail drugstores are located in 42 states (Form 10-K, 2012).

Pharmacy Services Segment.This business segment provides Pharmacy Benefit Management Services (PBMs). PBMs include Plan Design and Administration, Mail Order Pharmacy, Discounted Drug Purchase Arrangements, etc. (Form 10-K). The segment’s customers are individuals and sponsors of benefit plans all over the country. The clients are served in special retail pharmacy stores, mail order pharmacies and mail service pharmacies. These facilities are located in 22 states (Form 10-K, 2012).

The principal products and services. Net revenues are generated primarily by rendering health care services to members and providing prescription drugs for contracted clients. The share of government-funded programs and commercial payers in pharmacy revenues accounted for 97, 5% in 2012 (Form 10-K, 2012, p.8). In turn, pharmacy revenues constitute nearly 70% of Retail Pharmacy revenues (Form 10-K, 2012, p.7, 8). Besides, retail pharmacy features shifting from primarily dispensing prescriptions to providing services.

MinuteClinic, retail health care clinics, focus on family health care and provide services concerning diagnosis, writing prescriptions, and treatment of common illnesses for more than 13 million visitors (Form 10-K, 2012). These services are based on a cost-effective approach to health care that allows sustaining CVS’s competitive advantages.

In regard to products, net revenue of prescription drugs presents 68% of consolidated revenues; the contribution of general merchandise is 15% , over- the- counter care is about 11%, and beauty and cosmetics accounts to 5% of consolidated revenues (Form 10-K, 2012, p.7).

The largest markets of CVS Caremark.As a market leader in retail medical clinics and pharmacy services, CVS serves more than 400 million customers (CVS Caremark, n.d.). The company operates in 92 of the top 100 U.S. drugstore markets and has the largest market share in 74 of them (Form 10-K, 2012, p.6). It has strong market leadership in California and the solid presence in Florida, Texas and key Midwest markets (Form 10-K, 2012, p.27).

The CVS Caremark’s growth strategies.

To maintain a successful growth, CVS combines the internal growth strategy, which is primarily concerned with improving competitive strategies for existing business, and acquisitions.The key strategic mean used by CVS is organic growth (Wang, 2011). Merlo L.J., President and CEO of CVS Caremark, defined such an approach as “reinventing pharmacy” focusing on innovations (n.d.). The company concentrates mostly on its basic strategies:

• Innovations (Merlo, n.d.);
• Cost-effective leadership (Wang, 2011);
• Exceptional customer service(Merlo, n.d.; Form 10-K, 2012);
• Responsiveness to customers (Form 10-K, 2012);
• Products diversification (Wang, 2011).

As a corollary, in order to develop its competitive advantages and maintain market leadership moving forward, CVS implements the combination of strong organic growth and acquisitions while implementing innovative pharmaceutical solutions, exceptional client service, responsiveness to customers, product diversification and price cutting This approach allows driving revenues through increasing customer services (Wang, 20011, p.3, 4).