CVS Caremark

Woonsocket, Rhode Island-based CVS Caremark (NYSE:CVS) is the largest U.S.-based integrated pharmacy service provider, combining one of the leading American pharmaceutical benefit management companies (Caremark) with the country's largest pharmacy chain (CVS). The U.S. healthcare system is struggling to manage growing costs as employers shift responsibility for managing costs to employees. In response, CVS acquired Caremark for $26.5 billion in order to become more consumer-centric and responsive to rapid changes in the healthcare delivery system. This 2007 merger of the two entities was expected to permit more fully integrated pharmacy services, including pharmacy benefit management, mail order, specialty pharmaceuticals, an online pharmacy (http://CVS.com), and the retail-based health clinic subsidiary, MinuteClinic.

CVS Caremark has been making investments in new stores and technology in order to drive future growth both through in-house start-up and acquisitions. Several of their larger recent acquisitions include the 2004 purchase of over 1,200 Eckerd drugstores, primarily in high-growth markets in Florida and Texas, and in 2006 Southern California-based Sav-on and Osco drugstores (700 stores total) that were integrated into CVS/pharmacy. Altogether, CVS Caremark offers end-to-end services from plan design to prescription fulfillment. The company feels that the combination of CVS Caremark helps payers control costs more effectively, improves patient access (through phone, mail, the internet, or face-to-face), and promotes better customer health outcomes.

The lineage of CVS Caremark can be traced back to the Melville Corporation, a large retail holding company incorporated in 1922 as the Melville Shoe Company, and renamed in 1996 as CVS Corporation. (The CVS stands for Consumer Value Stores.) [Page 470]Caremark was established in 1979 as Home Health Care of America, changing its name to Caremark in 1985. In 1987 Caremark was acquired by Baxter International, but then spun off as a public company, Caremark, in 1992. In 1996 Caremark merged with MedPartners/Mullikin, Inc., and they became Med-Partners. In 1998 MedPartners changed its name to Caremark Rx.

CVS Caremark currently employs 136,000 people in two operating segments: CVS/pharmacy and Caremark Pharmacy Services. CVS/pharmacy fills more than one of every seven retail prescriptions in America, amounting to more than 1 billion prescriptions per year, which is more than any other pharmacy service provider. CVS/pharmacy generates over 68 percent of its revenues from its pharmacy business. Their ExtraCare program has enrolled over 50 million cardholders. Caremark Pharmacy Services is one of the nation's leading pharmacy benefit management companies, providing comprehensive prescription benefit management services to over 2,000 organizations' health plans, including corporations, managed care organizations, insurance companies, and government agencies. Caremark also operates a national retail pharmacy network of over 60,000 participating pharmacies, 11 mail service pharmacies, and 70 specialty pharmacies.

Among their initiatives in community involvement are the CVS Caremark Charitable Trust (education and community involvement in cities where the company operates pharmacies), the CVS Samaritan Vans providing free roadside (medical and on-site auto repair) assistance to motorists and communities in numerous cities, and the annual CVS Caremark Charity Golf Classic.

According to CVS Caremark, the average revenue per employee is close to $200,000. Strong future demand is anticipated in response to an aging population, increasing incidence of chronic diseases, and increasing utilization of the Medicare drug benefit.

...