CVS 2015 Annual Report Download - page 6

4CVS Health
Although our integrated model has certainly played
a key role in these results, nearly 44 percent of our
prescription growth since 2013 has been driven by
share gains from non-CVS Caremark payors. This is due
in part to the many programs we have put in place to
provide all customers with excellent service and value.
Our growth has also led to valuable economies of scale.
For example, our labor cost to fill prescriptions has fallen
by approximately 13 percent (excluding wage inflation)
over the past five years.
Our stores are also playing an important role in what we
call the retailization of health care. With the rise in con-
sumer-directed health plans, it is imperative that patients
stay on their medications. We encourage appropriate
patient behavior through our industry-leading adherence
programs. Additionally, the Affordable Care Act has led
increasing numbers of individuals to choose their own
health plans on public exchanges. We can effectively
support health plan partners with in-store displays and
service centers that support their outreach efforts.
I’ve already touched on the Target deal, which has
expanded our presence to regions such as Seattle, Den-
ver, Portland, and Salt Lake City. Across the enterprise,
you can now find a CVS Health location in every U.S.
state. We are currently in the process of rebranding these
assets as CVS Pharmacy® and MinuteClinic® locations.
CVS Pharmacy stores have typically filled twice the num-
ber of prescriptions as Target pharmacies, so these new
locations represent a significant opportunity to drive script
growth and profitability. In addition to the acquired Target
locations, we opened 161 new stores in 2015. Factoring
in closings, net units increased by 130 stores.
For our PBM business, members now have approxi-
mately 9,600 CVS Pharmacy locations to choose from.
That’s up from about 7,800 in 2014. This enhances the
relevance of Pharmacy Advisor, Maintenance Choice,
and our other integrated offerings since more members
will benefit from easier access to them.
Health and Beauty and ExtraCare® are driving front store
gains; CVS MinuteClinic™ expands its scope of services
In the front of the store, our average basket size in
2015 (after excluding the impact of our exit from
tobacco) increased 2 percent—and 4 percent in our
core health and beauty businesses. These results are
gratifying given the lackluster trend in overall shopping
visits across the retail landscape. Health and beauty
offer higher margins and growth opportunities than
other front store categories, and we are expanding
our emphasis on both through a combination of store
remodelings, merchandising enhancements, and
improved product mix.
Among other front store initiatives, shoppers have
responded enthusiastically to our expanded healthy
food options. We’ve also continued to strengthen our
position with Hispanic customers, the fastest-growing
demographic in the United States, by launching CVS
Pharmacy y más™ in 12 locations in Miami. These
stores offer hundreds of Hispanic products and services
not found in traditional drugstores, and we saw sales
in the test stores increase by an average of 10 percent.
We expect to expand on this concept in 2016.
The ExtraCare loyalty program, now in its 18th year,
continues to play an indispensable role in driving
profitable front store sales across all our stores. It helps
identify our higher-value shoppers so we can build on
our relationship with them through personalized promo-
tions. Such shoppers represent 30 percent of our retail
customer base, but they are responsible for driving more
than 80 percent of sales in the front of the store.
It has been more than a year since we stopped selling
tobacco in our stores, a move that better aligned our
business practices with our goals as a health care
company. At the time, we also reasoned that removing
a convenient location to buy cigarettes could decrease
overall tobacco use. A new study conducted by our
CVS Health Research Institute has shown that approxi-
mately 95 million fewer packs were sold in states where
CVS Pharmacy has a 15 percent or greater share of the
retail pharmacy market compared to states without a
large CVS Pharmacy presence. We continue to promote
smoking cessation in a variety of other ways, with our
30,000 pharmacists and 3,100 nurse practitioners
taking the lead.
The expansion of CVS MinuteClinic continued in 2015,
with the number of locations at year end totaling 1,135
in 33 states and Washington, D.C. That includes the 79
clinics we acquired from Target. More than 50 percent
of the U.S. population now lives within 10 miles of a
We have more ways in which
we can assist patients to help
drive adherence and improve
outcomes.