CVS 2008 Annual Report Download - page 15
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Please find page 15 of the 2008 CVS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.open to changes in plan design
that will help them save money and
improve outcomes. We did a survey
recently, and 66 percent of clients
placed a high priority on plan design
incentives that can change behavior.
You accomplish this by engaging
plan participants in their health care.
Well, we’re the only PBM that has
the ability to engage plan members
wherever they want to be engaged –
through the traditional channels of
mail, phone, and the Internet – as
well as through face-to-face interac-
tion with over 25,000 in-store
pharmacists, nurse practitioners,
and physician assistants.
Q. Is there anything to prevent another
retailer and PBM from joining forces and
developing a model similar to yours?
A. LM: Not really, but we obviously
have a pretty good head start in
terms of the services we’re offering
and in the back-end integration
of our systems. These things take
time. As fi rst movers, both CVS and
Caremark were also able to choose
the company that we each thought
would best fi t our approach to
pharmacy health care.
A. HM: Since the merger was
completed, we’ve also made great
strides in forming one culture across
the enterprise that capitalizes on
our unmatched breadth of capabili-
ties. Everyone here is excited by the
strength of our competitive position,
and we are working together to take
advantage of the opportunities in
front of us.
Q. Larry, how much is the recession
impacting the retail business?
A. LM: Script growth is slowing
industry-wide as some patients skip
visits to their doctors to save money.
That’s obviously disconcerting, both
from a revenue perspective and in
terms of improving patient outcomes.
Despite this, our retail segment still
posted record revenues and earnings
in 2008, and we continued to gain
share. Keep in mind that the front of
the store now accounts for only about
15 percent of the company’s consoli-
dated revenues, and most of those sales
come from non-discretionary items.
We sell over-the-counter medications,
toothpaste, and anti-perspirant, not fl at
panel televisions.
Q. Is the ExtraCare card helping?
A. LM: Absolutely. ExtraCare is the
largest loyalty program among all
U.S. retailers, and it has helped us
improve front-end margins and lead
the industry in same-store sales
growth. We can use it to target our
marketing efforts with great preci-
sion and drive traffi c to our stores.
The card is now used by well over
50 million active cardholders making
up more than 60 percent of our
front-end transactions.
Q. Specialty accounts for the fastest
growing sector in pharmaceutical spend
today. How will CVS Caremark help rein
in costs?
A. HM: This is an important question
because specialty costs have been
growing at 2.5 times the rate of
traditional pharmaceuticals. You
cannot lose focus on the fact that
these medications are very effective
and life changing for many patients.
At the same time, we need to ensure
appropriate utilization of these
products. Our internal data indicate
that an average of 10 percent of
specialty prescriptions are not written
in accordance with evidence-based
clinical guidelines. Our Specialty
Guideline Management program
helps clients identify that inappro-
priate utilization and avoid hundreds
of millions of dollars in spend, in some
cases reducing a client’s specialty
trend by 5 percent in a given year.
Q. Larry, how are things progressing
with the Longs integration?
A. LM: They’re moving smoothly.
Keep in mind that we’ve had a lot of
practice doing this with the former
Eckerd stores and then with the
stores we acquired from Albertsons.
We expect that the Longs store
systems conversion will be com-
pleted in May, and remodeling and
rebranding will be wrapped up by
October. So, we’ll be fi nished ahead
of the 2009 holiday shopping season.
Q. You opened some pilot Beauty 360™
stores in 2008. What are your plans
for 2009?
A. LM: Beauty remains one of the
key front-end categories in our
CVS/pharmacy stores, so we’ve
been leveraging that expertise by
pilot-testing this new retail concept
in selected cities. The initial feedback
has been positive, and we’ll continue
to open additional locations in ’09.
We’re going to move prudently as we
perfect the concept, especially in a
diffi cult economy.
Q. Is it fair to say that you both seem
pretty optimistic despite all the bad
economic news?
A. HM: I would say cautiously
optimistic. Larry and I can’t control
the macroeconomic environment,
but we’ve got great, differentiated
offerings that no other company can
bring to the table, and we’ve done
a good job at controlling expenses.
And in this diffi cult economic
climate, patients and payors need
cost-effective solutions, and we’re
best positioned to help them.
A. LM: We’re both pretty excited
about the long-term opportunities
we see for the pharmacy industry
in general and for CVS Caremark
in particular.
2008 ANNUAL REPORT 11