Background Information
CVS Pharmacy is a retail drug store in the U.S., managing various primary healthcare prescriptions across several states. The company works through retail outlets as semi-autonomous branches in the U.S. CVS pharmacy has more than 9900 branches that offer innovative care to improve general health outcomes of the American people (CVS Pharmacy, 2019). The services of the organization are geared towards enhancing specific pharmacology needs of patients across all ages, including providing healthcare options for the aging population. The company applies innovative models in pharmacy to manage its core business in the distribution of drugs within the U.S. Besides, the organization operates within three main segments, including pharmacy services, corporate, and retail business. Although the retail drugstore industry has several competitors, the mergers, acquisitions, and technology influence the operations of players and act as the main source of comparative advantage.
Mission
The CVS health mission statement entails: “Helping people on their path to better health.” The mission of the organization seeks to respond to the peoples’ healthcare needs and enhance the quality of life for the American people.
Goals
The business focuses on providing innovative strategies and quality service to enhance clinical solutions to citizens. The goal of the organization is: “to produce superior results for our clients and their plan members by leveraging our expertise in core PBM services, including: plan design offerings and administration, formulary management, Medicare Part D services, mail order, specialty pharmacy and infusion services, retail pharmacy network management services, prescription management systems, clinical services, disease management services and medical spend management” (CVS Health Corporation, 2015). Given that CVS pharmacy offers integrated services, it responds to its customers’ needs by providing professional support by more than 34000 pharmacists, nurses, and clinicians through direct and digital interactions (CVS Health Corporation, 2015).
The company has a strong value system of innovation, collaborations, caring, integrity, and accountability (CVS Pharmacy, 2019). The values help the company and its branches to mainstream quality into its products. Additionally, it influences professionalism into the organization’s workforce, especially when responding to customers’ needs. The overall objective of healthcare systems is to provide services for patients as they interact with facilities. The initiative enhances satisfaction, reduces costs, and improves the lives and lifestyles of the patients (Nguyen & Holmes, 2019). Therefore, the purpose statement of the company also emphasizes on helping the American people to a path of better health situations (CVS Pharmacy (2019). The purpose is achieved by providing quality prescription drugs and other medications specific to the American populace. Hence, to respond to these unique objectives, the organization enhances connections that revolutionize the experience of customers who access healthcare services.
Vision
The vision of the company indicates that: “We strive to improve the quality of human life.” The organization seeks to develop itself as a unique brand within the pharmaceutical industry. Therefore, the company has a unique selling proposition and projects to be the largest retailer and a significant pharmacy benefits manager (PBM) within the US.
Business Model
The business strategy of CVS pharmacy is to provide innovative models, improve customer service, and enhance strategies that meet the customers’ needs with the aim of improving clinical results of the patients. CVS Pharmacy provides its services through approaches, such as retail pharmacy, Pharmacy Benefit Management (PBM), and Minute clinic as major approaches. The model has enabled the organization to control the market, transform its operations through growth, and emerge as one of the largest healthcare drug providers in the U.S. market. CVS pharmacy has specialty capabilities in pharmacy and an enhanced customer service provision, which promote its business model leading to growth. The organization also reaches out to a significant number of customers through its franchises shops and branches across several states in the United States. CVS business model emphasizes various categorizations in consumer health needs. According to Loeb (2015), the acquisition of $ 1.9 billion target clinic business and pharmacy improved the company’s focus on its objective to improve traffic and drive business that concentrates on health and wellness of customers. The company forecasts its business to make a significant impact on major areas related to health.
Better Health
The company remodels its approach when providing healthcare services. According to Loeb (2015), the business seeks to remodel its focus on allergy, food, and vitamins within its 450 stores. The company continues to establish itself as a conscious entity in the health of the American people. The approach of CVS to discontinue the sale of tobacco products and cigarettes was a decision meant to reaffirm its position. Loeb (2015) further demonstrates that CVS ventures in the optical and hearing testing centers within its stores. The author posits that remodeling has occurred in several stores in Florida by taking a personal approach. Notably, the remodeling has enhanced sales to more than 10% revenue growth. For instance, Loeb (2015) observes that 700 stores in various locations have enhanced the quality of their shops through effective branding to improve recognition. The organization’s bold approach to quality services makes it a formidable company in the provision of competent and quality healthcare services.
Focus on Beauty
CVS Pharmacy also focuses on beauty products. Loeb (2015) explains that the organization has enhanced the beauty segment in more than 4500 stores. Improvement is made by providing a dynamic collection in the cosmetics and beauty skin care products. Additionally, it also focuses on facial care, especially given that there is an increase in the aging populations of the U.S.
Store Branding
CVS pharmacy has strengthened its recognition to become a significant health brand in the market mix. By uplifting its store appearances, the organization improves its visibility in the market and enables customers to recognize its improved outlook. Furthermore, the improved store brands act as a confirmation of quality and value and thus, supports the business approach by accelerating purchases of products in the health and wellness category (Loeb, 2015). Notably, product branding is a keen focus on the company.
Adherence Medication
The move to reemphasize on medication adherence is to encourage older generations to observe dosage as prescribed by clinical professionals. According to Loeb (2015), the organization introduced the innovative program to accelerate its sales, while encouraging quality medication adherence to senior citizens as an improved way of life. Therefore, the innovation models are a source of comparative advantage for the stores in the retail drug industry.
The objective of CVS pharmacy to respond to the dynamic health needs of the American people informs its continued growth through the penetration of its products to the market. Loeb (2015) illustrates that CVS has developed its business through effective mergers and acquisitions in the drug store sector. The author reiterates that although it is difficult to manage the acquisition in retail businesses due to enhanced consumer synergies, he confirms that the drug store sector has had a positive entry point, hence the success witnessed in the CVS model. The benefits were recorded after the firm converted the drug store as a destination to access health and wellness products or services. Loeb (2015) further illustrates that a winning strategy in the retail drug market lies in improving customer desires and putting their needs to precede the other objectives of the company. The author further elucidates that one of the significant advantages and breakthrough for the company transpired after more than 70 million members signed for the benefits care manager. Thus, the organization creates models of doing business, and its customer service approaches that focus on quality and value, which support growth and improve comparative advantage.
Identification of Current Market Situation
Mergers and acquisitions characterize the retail drug market in the U.S. The partnership between CVS and Aetna reflects a collaboration that defined the landscape of retail drug store. According to Abelson (2018), the approval of $69 billion by the justice department demonstrated substantial consolidation in the industry. According to CVS CEO Larry J. Merlo, the judicial approval was an imperative step towards consolidating the strengths and aptitudes of the two companies to improve the customer health care experience in the US (Abelson, 2018). Furthermore, the merger between the two firms will enhance coordinated care to their customers and help to manage cost escalations that may affect revenue streams. For instance, Aetna as a leading provider of insurance had revenue growth of $60 billion from the 22 million health plans while CVS recorded revenues of $185 billion over the previous year and managed prescriptions to more than 94 million customers (Abelson, 2018). Accordingly, Abelson, (2018) demonstrates that “the approval for merger marks the close of an era, during which powerful pharmacy benefit managers brokered drug prices among pharmaceutical companies, insurers, and employers.” Therefore, the merger of CVS and Aetna will have significant effects for the companies, which are likely to reduce the costs of services to the targeted consumers.
After the consolidation between CVS and Aetna, more mergers and acquisition have continued in the industry. The takeover of Express Scripts, which is a major competitor of CVS, determines trends in the industry. The approval by the justice department that Cigna, which is a strong player in the insurance sector, takes over Express Scripts demonstrates the changing operational landscape that redefines the model of competition in the industry. However, the mergers have also attracted criticism from various professionals in the industry, such as George Slover, who is a senior policy counsel for an advocacy group named Consumer Union (Abelson, 2018). The professional aver that such merger and acquisitions could lead to decreased competition due to dominance by few powerful actors, which may affect the access of value and choices because of reduced competition (Abelson, 2018). The concerns about the mergers and acquisitions may arise because citizens who are not covered within the players’ plans are likely to pay more for drugs and premiums while the companies’ clientele may benefit from reduced charges. Therefore, the move raises the concern of unequal treatment in the primary healthcare service provision (Abelson, 2018). According to Abelson (2018), the merger of CVS and Aetna created a significant force in the business within the American pharmaceutical industry. Additionally, OptumRx is currently owned by UnitedHealth Group. Notably, Anthem operates across several states as a profitable entity under the Blue Cross plans, which is diversifying to intramural pharmacy operations (Abelson, 2018). The perspectives above imply that players in the retail drug store in the U.S. market are developing models that augment their growth and enable them to respond adequately to the growing and diversified healthcare needs.
Competitor Analysis
Competition is a significant part of every business. The process enables players in an industry to enhance the quality and value of products. Furthermore, an industry with high competition must enhance customer service and focus on effective delivery systems and mechanism to implement the standards, which leads to growth. The drug industry is an essential sector since it deals with the citizens’ who are receiving primary health services within various facilities. Although the core business of the CVS is to dispense prescription medications, it is affected by the emergence of generic substitute products that are relatively cheap (CVS Health Corporation, 2015). Such medications from competitors affect its business model and approach in the industry. As such, the generic alternatives from other company brands may achieve higher profits since they are relatively cheap and utilize a positioning aspect, making them quality alternatives to the main brands. The generic drugs in the market from CVS competitors affect the company’s sales and impacts negatively on the organization’s profit levels. Therefore, the focus of offering quality prescription drugs is affected by various competitors in the market with cheaper drugs.
CVS pharmacy has several competitors in the market. The major competitors include Walgreen Boots Alliance, Amazon, Cigna, and United Health Group. Other significant competitors are The Target Corporations and Kroger. Nguyen and Holmes (2019) illustrate that the organization utilizes the pharmacy management systems to enhance electronic documentation and handle dispensing of relevant drug orders. Accordingly, the authors recommend that continuous improvement initiatives for quality assurance should be enhanced while developing individual and adaptable electronic tools and pharmacists. Therefore, technology is an important aspect that defines competitive advantage in the drug distribution sector. Farris et al. (2019) aver that CVS pharmacy is an integrated primary healthcare hub with the capacity to influence payers and consumers, through “innovative channel-agnostic solutions” and other complicated problems related to the management of care and costs. Further, Cornell, Clauson, and Cain (2019) state that CVS and other players in the drugstore enable businesses, individuals, and communities to manage their healthcare needs effectively and competitively through mobile apps and wearable technologies. Nonetheless, Technology has gained considerable influence in the retail drugstore industry.
The competitive environment in the American retail drug stores continues to grow to unprecedented levels. Japsen (2018) explains variances in the rise of revenues between competitors in the retail drug market. The rise in revenues for Walgreen Boots Alliance, which is a CVS rival continues to put pressure on the industry. For instance, Walgreen’s sales boost of 7.9% to $30.7 billion was attributed to new partnerships that attracted more customers (Japsen, 2018). The partnership with AllianceRx Walgreens Prime advantages the company making it a preferred pharmacy network for therapeutics, which is a PBM and makes it access 18 blue shield plans and blue cross of approximately 20 million members (Japsen, 2018). CVS acquisition of Aetna is expected to boost its sales revenue bottom lines and lead to further growth. Additionally, it is projected to enhance more competition in the industry because companies are struggling to outdo each other and respond to the expectation of their stockholders.
The competitors’ products are generally alike since they deal with healthcare options for their target clientele. However, to ensure competitive advantage, the industry players apply various unique strategies to achieve their objectives. Such strategies include price differentiation, simplified ordering, delivery systems, and brand promotions for their flagship products. Farris et al. (2019) illustrate that organizations such as CVS offer improved patient-centered medical home (PCMH) to enhance access within primary care during accessible hours. Therefore, integrating such service forms a significant part of managing competitive advantage for players in the industry. Besides, applying such progressive models enables handling of legal and compliance barriers through the integration of professionals, such as community pharmacists who employ innovative PCMH electronic medical records (Farris et al., 2019). Cornell et al. (2019) further demonstrate that technology is utilized by pharmacies in the platform of digital health to respond to healthcare needs. Accordingly, several players utilize competitive approaches and value addition to meet market expectations for comparative advantage.
S.W.O.T Analysis
The SWOT explains the internal and external situation of CVS pharmacy and the overall market position in the pharmaceutical industry.
| Strengths
|
Weaknesses |
| i. The organization operates the largest drug retailer network in the U.S.
ii. The firm is a leading pharmacy and benefits the American people by selling quality drugs. iii. It is steady in performance having been in operation for several years. iv. The company enhanced its brand in the market through its decision to end the sales of tobacco |
i. The organization concentrates its services exclusively on local markets, and hence a weak presence outside the U.S.
ii. CVS has significant legal challenges and other controversies on its refit practices, which affects the brand. |
| Opportunity | Threats |
| i. The organization has an opportunity in growth in the number of aging populations that require drugs and anti-aging pills.
ii. A massive corporate advantage enables collaborations, such as the acquisition of Aetna, which is likely to enable the company to venture into managed care and insurance. iii. The organization is fighting to manage the opiate crisis. iv. The company could tap into global markets through mergers and acquisitions. |
i. The interventions and other regulations from the government may affect the company’s operations.
ii. Several firms have adopted the mailing order pharmacy model, which creates competition for the company. iii. The retail drug sector has significant global competition from both conventional and unconventional providers of drugs.
|
Conclusion
The retail drug store industry in the U.S. has several competitors such as CVS, Walgreen Boots Alliance, Amazon, Cigna, and United Health Group among other players. However, the players have developed a business model of capacity consolidation through mergers, acquisitions, and technology influence, such as mobile phone apps and the use of wearable technology as a major source of comparative advantage. The operations of CVS pharmacy in several states are developed to provide primary healthcare products and service that respond to the needs of its customers. Additionally, the increased presence and business models enable access to services and products, thereby responding effectively to the healthcare needs of the American people.
References
Abelson, R. (2018). CVS Health and Aetna $69 billion merger is approved with conditions. New York Times. Retrieved from https://www.nytimes.com/2018/10/10/health/cvs-aetna-merger.html
Cornell, W. K., Clauson, K. A., & Cain, J. (2019). Updating the model: The case for independent pharmacy to embrace digital health. Innovations in Pharmacy, 10(1), 15-15. doi:10.24926/iip.v10i1.1645
CVS Health Corporation. (2015). Annual report. Retrieved from https://www.sec.gov/Archives/edgar/data/64803/000006480316000074/cvs-20151231x10k.htm
CVS Pharmacy. (2019). About. https://cvshealth.com/about/our-offerings/cvs-pharmacy
Farris, K. B., Mitrzyk, B. M., Batra, P., Peters, J., Diez, H. L., Yoo, A. … Marshall, V. D. (2019). Linking the patient-centered medical home to community pharmacy via an innovative pharmacist care model. Journal of the American Pharmacists Association, 59(1), 70-78. doi:10.1016/j.japh.2018.09.009
Japsen, B. (2018). Pressure’s on CVS as Walgreens’ U.S. pharmacy sales rise. Forbes. Retrieved from https://www.forbes.com/sites/brucejapsen/2018/01/04/pressures-on-cvs-as-walgreens-u-s-pharmacy-sales-rise/#77a8a9135bdd
Loeb, W. (2015). Why CVS’ new health initiatives are a winning strategy. Forbes. Retrieved from https://www.forbes.com/sites/walterloeb/2015/12/18/why-cvs-health-new-initiatives-are-a-winning-strategy/#410e6b426d42
Nguyen, E., & Holmes, J. T. (2019). Pharmacist-provided services: barriers to demonstrating value. Journal of the American Pharmacists Association, 59(1), 117-120. doi: 10.1016/j.japh.2018.11.007
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