CVS 2004 Annual Report Download - page 17

program in the U.S. Now former Eckerd customers in the South are enjoying
advertised discounts without the hassle of clipping coupons. They are also
reaping the benefits of the ExtraBucks™cash rewards that come with their sales
receipts each quarter. These are just a few examples of “CVS easy” in action,
and we continue to look for ways to further improve our customer experience.
Robust pipeline and new generics to help drive future growth
We are seeing a temporary slowdown in industry prescription growth, which is
due to a number of factors. They include the slow pace of new drug approvals,
higher co-pays and growing co-insurance arrangements, Rx to over-the-counter
switches, and the growth in mandatory mail order plans. However, ours is still
agrowth industry. Pharmaceutical and biotech companies are hard at work
discovering new drugs, and $40–$50 billion worth of branded drug sales will
come off patent by 2008. Generic equivalents will make these medications less
expensive and more accessible to a larger population. Furthermore, prescription
drugs often remain the most cost-effective form of healthcare delivery,reducing
the need for hospitalization and surgery and getting people back to work sooner.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003
will go into effect in January 2006, and we expect to be significant participants in
delivering this new benefit through our retail stores as well as our PBM.
Although we expect it to put some pressure on margins, this program should
prove to be a net positive for CVS. By making prescription drugs more affordable
to millions of senior citizens, this new benefit should increase their utilization.
Before signing off, I want to thank the more than 145,000 colleagues who focus
on our “CVS easy” mission every day they come to work. Some have been with
CVS for many years. Others—like the experienced and valued former Eckerd
employees—are relatively new to our company. Together their efforts made this
company stronger in 2004. I also want to acknowledge the work of our talented
and engaged board of directors, in particular the late Terry Lautenbach. Everyone
at CVS held Terry in high regard for his keen intellect. I valued the wise counsel
he gave our company and me personally during his tenure on our board, and his
sudden death has been a great loss. On a happier note, Hasbro President and
CEO Alfred Verrecchia joined our board in September, and we’ve quickly put the
financial and operational skills of this seasoned executive to work on your behalf.
With 2005 well underway, we have good reason to feel confident. Our core
business is thriving and the integration of the acquired Eckerd businesses is
proceeding smoothly.Our focus on new markets provides a valuable engine for
growth. In unlocking the value of the former Eckerd stores, we have a great
opportunity to improve their profitability and gain market share. Our retail and
PBM strengths also leave us uniquely positioned in our industry. Although we
15
’02 ’03 ’04
804
1675
3074
24-and Extended-
Hour Stores
’02 ’03 ’04
4087 4179
5375
Store Count