CVS 2006 Annual Report Download - page 6

2006 Annual Report 3
Gaining share in the front end and broadening
our healthcare offerings
In the front of the store, our continued focus on the health,
personal care, and beauty categories drove industry-leading
same store sales growth. The average front-end transaction
grew to approximately $11 in 2006. Moreover, the ExtraCare
loyalty program continued to increase in popularity with card
use exceeding 63 percent of front-end sales.
Our acquisition of MinuteClinic, completed in September,
allows CVS to provide customers with convenient, cost-effective,
and high-quality care for common family ailments right in our
stores. The high level of patient satisfaction received to date
has solidified our belief that this is the right concept for con-
sumers, payors, and providers. We made the decision to buy
MinuteClinic, already a strategic partner, because we wanted
control of its brand as well as personnel decisions, hours of
operation, and expansion rate. Most importantly, we saw an
opportunity to benefit from additional revenues and profits.
Since the acquisition, we have almost doubled the number of
MinuteClinics from 83 to 155 across 19 states. Furthermore,
we plan to open approximately 300 MinuteClinics in 2007
with well over 2,500 CVS/pharmacy stores slated to have
MinuteClinics over the long term.
Creating a company that serves payors and
consumers more efficiently
As this report goes to press, we are also close to a shareholder
vote on our proposed merger of equals with Caremark Rx, Inc.
If successful, the resulting entity, CVS/Caremark Corporation,
will combine our unmatched retail footprint and PharmaCare
subsidiary with Caremark’s leading PBM business. Together,
we will create the nation’s premier pharmacy services provider,
broadening our respective healthcare missions and positioning
ourselves to drive many of the changes that will reshape our
industry in the coming years.
Shareholders of both companies have yet to vote on the
merger, but we are optimistic about the outcome. Regardless,
CVS/pharmacy and PharmaCare have proven how powerful
a combined retail/PBM model can be. We will aggressively
leverage these twin strengths in the future, because they will
allow us to pursue new opportunities and help improve the
delivery of healthcare in the United States. Consumers want
convenience, choice, and to get more for their healthcare dollar.
Employers and health plans want to give plan members access
to a full range of integrated pharmacy services, promote better
health outcomes, and control costs at the same time.
Managing the significant costs of specialty pharmacy care
remains a critical area of concern for employers and other plan
sponsors. We are well-positioned to address this issue through
end-to-end participation – from plan design to delivery of
value-added pharmacy services via face-to-face interaction
with customers. We can accomplish this on a broader platform
through our proposed merger with Caremark or through accel-
erated organic growth of our retail/PBM model. We will carefully
evaluate all our opportunities to ensure that we help drive the
changes necessary to improve our industry.