CVS shifting focus to medical care
Company plans to slash amount of retail space.
CVS Health plans to reduce the amount of store space devoted to retail and shift more to health care after its $70 billion acquisition of Aetna.
CVS CEO Larry Merlo told USA TODAY that the company will begin using a greater portion of the floor space in its nearly 10,000 locations to provide medical services.
“I don’t see the size of the store changing from what you would know it to be today, but I do see some space being repurposed,” Merlo said Wednesday in an interview.
The company plans the gradual shift after it finalized its acquisition of Aetna on Wednesday. The deal comes as CVS is aiming to diversify its business, navigate the changing health care industry and fend off Amazon.
Merlo said he envisions the “CVS Pharmacy evolving from not just a store that happens to have a pharmacy and products” into “more of a health care destination.”
He said CVS stores would still “have a rich array of products that are focused on health, beauty, personal care and elements of convenience” along with “added services.”
Retail sales at CVS are increasingly less important to the company’s finances. In the first nine months of the year, pharmacy prescription sales were more than three times retail product sales.
And retail sales were up only 1.5 percent during that period.
CVS already has invested in developing a network of MinuteClinic locations inside about 1 in 9 of its stores to provide diagnosis and treatment of basic illnesses.
But its stores also could “partner broadly with others in the community around elements that indirectly impact health care,” such as recently hospitalized patient transportation to checkups and “access to food services,” Merlo said.
“Our goal is to have some concept stores operating early next year,” he said. “I’m sure we’ll get some tremendous learnings from those first stores.”
With Aetna in hand, CVS is pledging to lower costs for patients and improve results. That’s a tall order, given that many industry players have tried and few have succeeded.
Moody’s Vice President Mickey Chadha wrote Wednesday that CVS faces “high execution and integration risk” as it seeks to make the deal successful.
CVS believes it can deliver healthier outcomes by controlling several key stages of the health care industry, including pharmacy, drug distribution and insurance. The goal is to cut excess costs and help treat patients more effectively and more efficiently.
CVS said it’s aiming for “synergies,” which usually means cost cuts, of more than $750 million by 2020.