CVS 2011 Annual Report Download - page 7

Download and view the complete annual report

Please find page 7 of the 2011 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.

Page out of 84

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84

CVS CAREMARK 5 2011 ANNUAL REPORT
which is expected to save us more than $1 billion
cumulatively through 2015.
Our specialty pharmacy revenue has risen by more
than 17 percent annually over the past two years
and is expected to account for $15 billion in sales in
2012. We stand to benefit from this sector’s robust
R&D pipeline and have numerous offerings that
help PBM clients manage their specialty spending
more effectively.
The government is rapidly emerging as the major
payor for prescription drugs in the United States.
Forecasts vary, but Medicare and Medicaid could
be paying for as much as two-thirds of all U.S.
prescriptions by 2020, up from approximately
one-third today. Our integrated business model is
very well-positioned to serve these populations.
We are focused on building a leadership position
in the Part D business and investing in state-of-
the-art systems to handle its challenging regula-
tory requirements and complex benefit designs.
We’re Reinventing the Role of Our Retail
Pharmacists, Leading in Adherence, and
Gaining Share
Our focus on superior customer service, increased
access, and patient care improvements contin-
ued to drive share gains in our retail pharmacies.
Pharmacy same-store sales increased 3.1 percent
in 2011. That pushed CVS/pharmacy’s share of the
total U.S. retail prescription market to 19.5 percent,
up nearly six percentage points since 2004.
Much of the credit goes to the evolving role of our
pharmacists, who have seen their traditional role
as dispensers of medications expand greatly to
focus on providing broader health care services.
Today, CVS pharmacists are trained to adminis-
ter vaccinations and to consult with patients on
opportunities to improve adherence, close gaps
in care, and lower their costs. Based on our data,
CVS/pharmacy now has the highest adherence
rate among top U.S. pharmacy retailers. This is
critical because non-adherence – that is, not refilling
prescriptions or not refilling them on time – costs
the U.S. health care system an estimated $300 bil-
lion annually in avoidable health care costs.
Our pharmacies also have the highest generic
dispensing rate, or GDR, in our industry, which is
helping PBM clients and patients save money.
Although the lower prices of generic drugs can
exert a drag on revenue growth, their greater
margins help drive profitability. We see significant
opportunities on the horizon to further increase our
GDR. In 2012 alone, approximately $35 billion of
branded drug sales will lose patent protection.
Our ExtraCare® Loyalty Program, Clustering
Initiatives, and Store Brands Remain Key
Drivers of Front-Store Profitability
Our front-store business also turned in another
year of solid performance in a weak economy, with
front-store same-store sales increasing 0.8 percent.
Introduced back in 2001, our ExtraCare loyalty
program provides us with a powerful competitive
advantage. The largest and most successful retail
loyalty program, it has more than 67 million active
households and currently accounts for approxi-
mately 85 percent of our front-store sales. ExtraCare
enables us to execute a targeted front-store promo-
tional strategy and drive more profitable sales.