CVS Will Double The Number Of MinuteClinics To Tap Growing Demand

CVS Caremark (NYSE:CVS), the U.S.’s second largest drug retailer after Walgreen with 7,300+ stores, plans to expand its MinuteClinic footprint from present 650 to 1,000 by 2016. The 2006-acquired subsidiary forms the largest retail-based walk-in medical clinics in the country. MinuteClinic continued its expansion and achieved break-even profitability in 2011. CVS Caremark is an integrated pharmacy services provider and drugstore chain that competes with Walgreen (NYSE:WAG) and Rite-Aid (NYSE:RAD). It has efficiently leveraged its integrated business model to come up with unique and differentiated offerings like Maintenance Choice and Pharmacy Adviser, which have already gained significant traction among its retail customers and PBM clients. Making MinuteClinic part of Caremark’s Pharmacy Benefit Management’s coverage has given it an advantage in the marketplace.

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MinuteClinics Drive Pharmacy Sales

CVS Caremark acquired MinuteClinic in 2006 and has since increased locations by more than 8x in the past five years, from 80 in 2006 to 645 today. CVS has announced further plans to open 500 clinics over the next 5 years. Staffed primarily by nurse practitioners and physician’s assistants, MinuteClinics treat common ailments and offer routine vaccinations, and is cheaper than a typical visit to the doctor’s office or emergency room and do not require an appointment. This helps increase accessibility to primary health care at lower cost. Demand for primary health care is expected to sharply increase when 32 million more Americans will obtain health insurance from 2014 through health care reforms.

Apart from offering a convenient way for people to get common vaccinations, MinuteClinic also focuses on preventive care, diagnostic tests and monitoring of chronic conditions such as diabetes, hypertension and high cholesterol. They usually feature at CVS pharmacy locations and help drive up prescription filling rates at the pharmacies and increase the ability to cross-sell other front-end products to customers who come in for prescriptions, as they wait for their appointments.

Integrated Model Adds Value To PBM Offering

The collaboration of MinuteClinic with CVS Caremark’s Pharmacy Benefits Management business has added more value for its PBM clients as well as by creating several unique and differentiated offerings. For example, PBM clients have the option of altering their benefit structure to substantially reduce or eliminate co-pays at MinuteClinics, and receive flu vaccinations, biometric screenings, in addition to preventive care and monitoring of chronic conditions at these locations.

MinuteClinic has also established formal clinical and information system affiliations with other health systems and working on the integration of electronic medical records to improve its health care services and reduce costs.

We have a $47 price estimate for CVS Caremark, about 5% ahead of the current market price.