CVS' deal to acquire pharmacy benefits manager Caremark Rx comes at a time when competition from retail pharmacies and mail order is at its most intense.
"The growth of the mail channel has been a concern to the retail pharmacies for several years," SG Cowen analyst Kemp Dolliver told Reuters. "That's the biggest thing: Mail not only takes business away from the back end of the retail pharmacy, but essentially reduces the traffic."
With its acquisition of Caremark for $20.6 billion, CVS gets a company that has access to customers it doesn't reach. Caremark administers drug benefits for employers and health plans buying prescription medicines in bulk to manage costs. Medicines are delivered to consumers via the mail.
Standard & Poor's analyst Joe Agnese said the deal would help CVS "increase the size and offerings of its pharmacy benefits management business, eliminate a major competitor for its retail drug business and potentially result in scale and distribution efficiencies."
Discussion Questions: What will the deal to acquire Caremark mean for CVS and its competitors? How does this deal combined with CVS' acquisition of MinuteClinic position the company for the future?
"This merger is a logical evolution for CVS, Caremark and the entire pharmacy industry," said Tom Ryan, chairman, president and CEO of CVS in a press release. "Over the past year, Mac (Mac Crawford, chairman, CEO and president of Caremark) and I have developed a shared view of where the healthcare market needs to go and how we can work together to get there first. Employers and health plans want to control costs, but also want their plan members to have access to a full range of integrated pharmacy services. Consumers of prescription drugs demand convenience and want to get more for their healthcare dollar. Together, CVS and Caremark will help manage the costs and complexities of the U.S. healthcare system, offering unparalleled access and driving superior healthcare outcomes, enhancing value for employers, health plans and consumers."