CVS 2013 Annual Report Download - page 23

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2013 Annual Report
to increase to 43 million people by 2016. Growth will
come from the continuing transition of fee-for-service
Medicaid members to Managed Medicaid as well as
from new enrollees resulting from the ACA’s expanded
eligibility. CVS Caremark is the clear market leader
among Managed Medicaid PBMs with a 28 percent
share of covered lives, and our capabilities will help
us maintain this position. We also have a 20 percent
share of Medicaid prescription volumes through our
retail stores. Our retail footprint and capabilities give us
an opportunity to gain even greater share as Managed
Medicaid providers show an interest in narrowing their
retail pharmacy networks to save costs.
The Medicare Part D market remains a very important
part of our growth strategy as well. With 15 million
people aging into Medicare by 2020, drug spending in
the Medicare space is expected to grow at an 8.6 per-
cent compounded annual growth rate. We remain the
number three player in the PBM market, covering 6.8
million lives through our SilverScript product or through
our health plan clients where we serve as the PBM.
We will also participate in coverage expansion through
both public and private health insurance exchanges.
Looking at the private exchanges, we can reach active
employees not only through our commercial health plan
partners, but also through direct relationships on key
exchanges. We connect with Medicare-eligible retirees
through our MA-PD and PDP health plan partners and
our CVS Caremark SilverScript PDP. Looking at public
exchanges, our PBM covers 70 percent of the eligible
exchange population through our health plan customer
relationships. Access to the exchange population rises
further if you factor in states where we have CVS/phar-
macy preferred-network relationships.
With the growth in exchanges and government lines of
business, our ability to serve health plans whether or
not they are PBM clients is increasingly important. Lever-
aging our retail footprint, we can support health plan
marketing initiatives ranging from limited pilot marketing
programs to full-scale educational programs. Some of
our health plan partnerships also include participation
in preferred or restricted pharmacy networks. Many
plans are taking advantage of MinuteClinic’s convenient
and affordable services as well as cost-saving PBM
services and programs to better manage rising specialty
pharmacy costs.
Our recently announced decision to remove cigarettes
and all tobacco products from our store shelves by
October 2014 has generated an overwhelmingly positive
response from customers, health plan and employer
clients, legislators, and public health and Medicaid
officials. They all see the health benefit of this move and
the role that pharmacy can play in smoking cessation.
Some 16 million people in this country already have at
least one disease from smoking, and it still accounts for
approximately 480,000 deaths each year. Simply put,
the sale of tobacco is inconsistent with our corporate
purpose of helping people on their path to better health.
As the delivery of health care evolves with an emphasis
on better health outcomes, reducing chronic disease,
and controlling costs, we’re playing an expanded
role in providing care through our pharmacists, nurse
practitioners, and physician assistants. This significant
action further distinguishes us in how we are serving our
patients, clients, and health care providers, and better
positions us for continued growth in the evolving health
care marketplace. Although this decision will have some
impact on revenues and profits, we believe that it is the
right thing to do given our expanding role as a health
care company.
Clearly, we are in the midst of an exciting and pivotal
moment for our company and our industry. In closing, I
want to thank our board of directors, our shareholders,
and the more than 200,000 colleagues who have played
such an important role in CVS Caremark’s achievements.
They have worked hard to develop our sustainable
competitive advantage and to meet the needs of the
health care system of the future.
Sincerely,
Larry J. Merlo
President and Chief Executive Officer
February 11, 2014