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BrainTrust Advice 2006: 'Told You So, CVS'

Written by George Anderson

By George Anderson

There was a whole lot of buying going on at CVS this year. The drugstore chain was in wheeling and dealing mode as it started by buying MinuteClinic, an operator of in-store health clinics, followed by a purchase of 700 standalone Sav-On and Osco drugstores from Albertsons and, most recently, agreeing in principle to acquire the pharmacy benefits manager Caremark (deal pending).

Tom Ryan, the chain's chief dealmaker as well as chairman, president and CEO, has looked for acquisitions he believes will put CVS out in front of, in his view, the "logical evolution" of the pharmacy industry.

RetailWire has followed the doings at CVS quite closely and members of the BrainTrust haven't been shy in sharing their opinions every step of the way.

Buys MinuteClinic
"This is an excellent strategy for CVS. This allows them to ultimately make a CVS location a total health one-stop. Imagine, for non-serious life threatening illness, coming to CVS to see a physician, then getting the medication filled while you shop for other sundries. CVS is clearly a leader and innovator. I see down the road an alliance between the clinic division and the PharmaCare division to reduce healthcare costs for corporations." - Bernie Slome, VP Business Development, ICC/Decision Services

"I sense a glut of in-store clinics coming our way. Everyone's going to have a clinic; it's a matter of which retailer is the best at branding it and keeping up simple but high quality care. I read the other day about one store starting to give meningitis shots. My advice -- be careful what you offer." - Len Lewis, President, Lewis Communications, Inc.

Buys Sav-On and Osco
"One thing to note is the boost these Osco/Sav-On units will get from being associated with CVS in terms of manufacturer support -- especially OTC and HBA manufacturers. We have seen these stores immediately jump from 'C or D' to 'A or B' in terms of strategic priority as soon as they are disassociated from the poor performing (at least for HBA) Albertsons chain banner. This means more focus and resources and, therefore, a built-in growth factor for these units as part of CVS." - Ben Ball, Senior Vice President, Dechert-Hampe

Agrees to buy Caremark
"The potential payoff seems to be in the pharmacy benefits management business. I hate to spoil my almost perfect track record of disagreeing with analysts, but this time I agree. The drug store companies that somehow have the resources to be in position to address whatever ways healthcare in this country morphs stand to win, and win big. He with the broadest service portfolio seems to be ahead, at least for now." - Ryan Mathews, Founder,CEO, Black Monk Consulting

"CVS wants to own the prescription business, whatever the channel. To reduce their costs, insurance companies favor mail order prescriptions. Walgreens makes plenty of money without the mail order business. Nothing in the prescription drug business is likely to change that situation in the foreseeable future. If Walgreens can't buy a mail order business at a reasonable price right now, there would seem to be no urgency." - Mark Lilien, Consultant, Retail Technology Group

Discussion Questions: What do you see as the most significant development at CVS in 2006? What advice do you have for CVS heading into 2007?

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