CVS Caremark (NYSE:CVS), the U.S.’s second largest drug retailer, has expanded its retail health-care clinic footprint by more than 8x to 650 in the last five years and plans to add another 350 by 2016. Through MinuteClinics that feature at its pharmacy locations, CVS Caremark has significantly outpaced its competitors Walgreen (NYSE:WAG) and Wal-Mart (NYSE:WMT) in the race to provide basic health care at its stores through retail-based walk-in medical clinics.
Staffed primarily by nurse practitioners and physician’s assistants, retail health clinics treat common ailments and offer routine vaccinations. They are 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.
In 2007, Wal-Mart announced plans to open thousands of health care clinics across the U.S. but has fallen quite short of its targets and just operates 150 clinics today. It in fact ended up shutting down 33 clinics this year and is rethinking its strategy to allow hospitals/doctors to operate from its stores. At the same time, Walgreen, which acquired Take Care Health Systems in 2007, expanded its retail clinic presence 3x from 110 stores in 2007 to more than 350 today, but still lags behind CVS Caremark which operates its MinuteClinics from 650 locations. 
MinuteClinics Drive Retail Sales and Add Value for PBM Members
CVS Caremark plans to further expand its MinuteClinic footprint from present 650 to 1,000 by 2016. MinuteClinics grew revenues by 22% last quarter and achieved break-even profitability in 2011. Apart from offering a convenient way for people to get common vaccinations, CVS’s MinuteClinic also focuses on preventive care, diagnostic tests and monitoring of chronic conditions such as diabetes, hypertension and high cholesterol. MinuteClinics 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.
CVS has also efficiently leveraged its integrated business model to add value to its offerings. It has made MinuteClinic a part of its PBM coverage by allowing its PBM clients the option of altering their benefit structure to substantially reduce or eliminate co-pays at MinuteClinics.
MinuteClinic has also established formal clinical and information system affiliations with other health systems and is 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.Notes: