CVS 1998 Annual Report Download - page 11

patients and physicians to facilitate clinical manage-
ment. PharmaCare developed its Clinical
Information Management System (CIMS), a pro-
prietary formulary management tool and unique
communication system that has proven to be
tremendously effective in directing utilization to
the most appropriate and cost effective medications.
More than 30,000 physicians now participate
in CIMS, making it a leading formulary compliance
tool that provides us with a key competitive advan-
tage in attracting managed care customers. In 1998,
PharmaCare began implementing managed care
contracts covering more than two million lives,
including programs for the Department of Defense
(Champus) and several leading health maintenance
organizations (HMOs), such as Health Partners
of Minneapolis. With these contracts, PharmaCare
will manage prescription services for more than
six million lives. PharmaCare’s ability to garner
new contracts helps drive CVS’ core business, as
evidenced by our industry-leading pharmacy sales
growth. With more and more consumers becoming
part of managed care programs, we expect this
segment of our business to continue to grow.
your health
9
Building Core Destination Categories
and Tailoring to Local Markets Are
Keys to Our Future Success
CVS’ strategy for success is rooted in our
belief that we can offer value to customers by
differentiating our merchandising and marketing
of key destination categories, including beauty and
cosmetics, photofinishing, greeting cards, over-the-
counter drugs, seasonal merchandise and CVS
brand products. These core businesses—coupled
with our ability to tailor stores to the local commu-
nities they serve—will be key factors contributing
to CVS’ continued success.
We continually look for ways to make our
product assortments and services more appealing to
customers. In the beauty category, for example,
CVS was the first drugstore chain to launch a
money-back guarantee on cosmetics. We also recog-
nized the popularity and potential of key brands
that typically have not been sold in drugstores.
For example, Ultima II cosmetics, formerly only
available in department stores, have now been
introduced in 3,000 of our stores. As a result of
these and other customer-focused initiatives, sales
in the beauty category increased 30% last year. We
are actively exploring general merchandise sales
opportunities to drive sales of these products that
appeal to customers. We are also taking steps in
other categories, such as photofinishing, where we
plan to have one-hour photo labs
installed in 2,000 stores by the end
of 1999. In greeting cards,
we continue to increase
productivity by working
with our vendors to refine
our assortments and in-store
displays. During the 1998
holiday season, CVS generated
a high level of consumer excitement with its pro-
motion of an exclusive line of “misfit” beanbag
characters. The characters were inspired by the
annual television special, “Rudolph the Red-Nosed
Reindeer”*and its “Island of Misfit Toys.”*We
introduced two new characters each week between
Throughout our stores, commitment to service is our first
priority. Our advanced pharmacy technology enables our
pharmacists to spend more time counseling customers on
over-the-counter medications and other healthcare needs.
* © 1998 & ® The Rudolph Co., LP,
under license to GT Merchandising & Licensing Corp.