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CVS plans to buy its way into the primary care business

Written by George Anderson

Photo: CVS Health

CVS has arguably been the driving force behind America’s acceptance of health clinics in retail store environments. The drugstore giant acquired MinuteClinic in 2006 and grew it from 83 in-store clinics staffed by nurse practitioners to more than 1,100 today. Now, the chain is looking to take the next step with retail clinics staffed by doctors. Karen Lynch, president and CEO of CVS Health, speaking earlier this week on the retailer’s earnings call, responded to an analyst’s question about the company’s plans going forward. She said that CVS is focused on three specific categories of health services — primary care, provider enablement and home health. She said, “We can't be in primary care without M&A.” CVS CFO Shawn Guertin said that the company was evaluating possible acquisitions based on several factors including “their capabilities to drive real and lasting value, the financial dynamics of these different business models and the optionality and growth levers that they provide us with, including our own ability to deploy our existing assets and create value in these entities.” Mr. Guertin said that “there is no one-and-done asset” that will meet all of CVS’s strategic acquisition needs. CVS’s desire to move into primary care has likely been intensified by Walgreens' acquisition of VillageMD.  Walgreens, under CEO Roz Brewer, has focused on the primary care opportunity and is aggressively opening MD-staffed clinics inside its stores. It expects to have 1,000 clinics in operation across the U.S. by 2027. Amazon.com last month said that it had reached a deal to acquire One Medical, a “technology-powered national primary care organization” that combines in-person, digital and telehealth services to care for patients. Walmart last year acquired MeMD, a company offering nationwide virtual medical and mental healthcare services. The move was seen as complementary to in-person Walmart Health centers operated by the company that also have doctors treating patients. CVS earlier this week reported better than expected sales and earnings for the second quarter and lifted its outlook for the year in the process. The company posted an eight percent year-over-year gain in same-store sales as front-of-store comps jumped nine percent and pharmacy improved 7.6 percent. CVS now expects full-year earnings to come in between $8.40 and $8.60 a share, up from $8.20 and $8.40.

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