CVS aims at Ama­zon with next-day drug de­liv­ery

On­line mer­chant may get into pre­scrip­tion sales

USA TODAY US Edition - - MONEY - Nathan Bomey

CVS Health plans to be­gin of­fer­ing next-day de­liv­ery of pre­scrip­tions and re­tail mer­chan­dise from its na­tion­wide net­work of more than 9,700 stores, mark­ing a po­ten­tially pre­emp­tive strike at Ama­zon as the on­line gi­ant weighs en­try into the phar­macy business.

CVS CEO Larry Merlo said Mon­day that the com­pany would be­gin of­fer­ing the ser­vice in 2018.

Stores in Mi­ami, Bos­ton, Philadel­phia, Wash­ing­ton, D.C., and San Fran­cisco will of­fer same-day de­liv­ery, he said.

The move comes as Ama­zon is said to be con­sid­er­ing sell­ing pre­scrip­tion drugs, which would re­quire nav­i­gat­ing a com­plex thicket of reg­u­la­tory ap­provals but would rep­re­sent a sig­nif­i­cant threat to CVS.

It also comes as CVS grap­ples with de­clin­ing in-store sales as many of the re­tail prod­ucts the com­pany sells are con­tract­ing.

The com­pany will also of­fer free, same-day from all of its lo­ca­tions in Man­hat­tan start­ing Dec. 4.

CVS spokes­woman Erin Pensa de­clined to say how the com­pany would han­dle the lo­gis­tics of pack­ag­ing and ship­ping, but said it would be han­dled by “a na­tional part­ner.” Prod­ucts will be shipped from lo­cal phar­ma­cies, not from a ware­house. She said in an email that pric­ing will be an­nounced later but will be “af­ford­able.”

Merlo said CVS has an ad­van­tage be­cause 70% of Amer­i­cans live within three miles of a CVS store.

CVS Phar­macy Pres­i­dent He­lena Foulkes said next-day ship­ping has al­ready been tested in 1,600 stores.

A di­vi­sion that man­ages pre­scrip­tion drug ben­e­fits helped off­set a de­clin­ing in-store per­for­mance in the third quar­ter for the drug-store chain.

CVS on Mon­day re­ported slightly bet­ter-than-ex­pected rev­enue and profit for the pe­riod but stayed tight-lipped on its ru­mored talks to ac­quire health in­sur­ance gi­ant Aetna.

CVS recorded third-quar­ter rev­enue of $46.18 bil­lion, up 3.5%. That nar­rowly edged S&P Global Mar­ket In­tel­li­gence ex­pec­ta­tions of $46.17 bil­lion.

Hur­ri­canes Har­vey, Irma and Maria took a $55 mil­lion bite out of the com­pany’s earn­ings, mostly in the form of pay­ments in in­sur­ance de­ductibles, Merlo said on a con­fer­ence call.

Some 925 CVS lo­ca­tions were closed at some point in the quar­ter be­cause of the storms.

The com­pany’s phar­macy ser­vices di­vi­sion, which man­ages drug ben­e­fits as an in­ter­me­di­ary be­tween in­sur­ers and drug com­pa­nies, grew into an even big­ger part of its business in the third quar­ter.

That unit’s sales rose 8.1% to $32.9 bil­lion as pre­scrip­tion vol­ume, mail or­ders and spe­cialty drugs in­creased.

The way CVS re­ports its re­sults, its phar­macy ser­vices di­vi­sion over­laps with its re­tail seg­ment, whose rev­enue was down 2.7% to $19.6 bil­lion.

Sales at CVS stores open at least a year, a met­ric viewed as a vi­tal gauge of a re­tailer’s health, de­clined 3.2%.

CVS said its same-store sales were hurt by an in­crease in generic drugs, lower in­sur­ance re­im­burse­ment rates, an in­ten­tional move to cut store dis­counts and less foot traf­fic.

Fac­ing the po­ten­tial en­try of on­line gi­ant Ama­zon into the phar­macy business, CVS is said to be con­sid­er­ing a mas­sive of­fer to buy Aetna, which re­cently aban­doned a pro­posed tie-up with Hu­mana amid reg­u­la­tory pres­sure.

A deal with Aetna would give CVS a hand in most ma­jor el­e­ments of the health care business, in­clud­ing in­sur­ance, phar­macy ben­e­fit ser­vices, phar­macy sales and even clin­i­cal care.

CVS stock was down 3.5% to $66.80 at mar­ket close on Mon­day.

CVS plans to be­gin its med­i­ca­tion de­liv­ery ser­vice next year. MATT ROURKE/AP

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