CVS aims at Amazon with next-day drug delivery
Online merchant may get into prescription sales
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.