CVS Caremark (NYSE:CVS) is the second largest drugstore chain in the U.S. after Walgreen (NYSE: WAG), and remains committed to its goal to create a national primary care platform that provides integrated high quality care that is convenient, accessible and affordable. Over the last five years, CVS claims to have gained significant share over its competitors in the overall retail market. It accounts for more than one in every five prescriptions filled in the U.S. 
In addition to increasing its store base, the company has been able to retain a very high percentage of Walgreen customers it captured during the Walgreen-Express Scripts dispute in 2012. Also, a continuous improvement in serving its customers has helped grow CVS’ retail business. The company considers MinuteCinic to be an important factor responsible for its retail and enterprise growth.
The increasing shortage of primary care physicians is expected to benefit retail clinics, such as MinuteClinic, in the future. Having the largest and fastest growing retail clinic store count, CVS is in a strong position to benefit from the above trend.
Our price estimate of $70 for CVS Caremark is at a discount of approximately 10% to the current market price.
What is MinuteClinic ?
MinuteClinics are small walk-in retail health clinics within the CVS Caremark pharmacy stores which utilize nationally recognized protocols to diagnose and treat minor health conditions, perform health screenings, monitor chronic conditions and dispense vaccinations at much lower prices than a hospital. It is usually staffed with advanced degree nurses known as nurse practitioners who treat routine maladies.
The first QuickMedx centers (MinuteClinic’s predecessor) opened in the U.S. in 2000 and offered treatment for seven common medical conditions – strep throat, mono, flu, pregnancy testing and bladder, ear and sinus infections. With the addition of insurance coverage and other improvements, QuickMedx became MinuteClinic in December 2002. MinuteClinic opened its first walk-in medical clinics in CVS Caremark in early 2005.
At present, there are over 800 MinuteClinic locations inside CVS/pharmacy stores in 28 states and the District of Columbia.
Shortage Of Primary Care Physicians to Benefit CVS
The U.S. is currently facing an acute shortage of primary care physicians. With 30 million additional Americans expected to be included under healthcare coverage (as a result of the Affordable Care Act), the demand is expected to outweigh the supply by about 45,000 doctors by the end of this decade.  Expanding the MinuteClinic footprint can help CVS take advantage of this huge demand-supply gap.
CVS registered a 11.4% year-over-year increase in revenue from MinuteClinics and opened 28 new places in Q1 2014. It expects to take the total to 150 new MinuteClinics by the end of the year and plans to operate about 1,500 clinics by 2017. 30% of the expansion will be in new markets.
MinuteClinic Is The Largest & Fastest Growing Retail Clinic Operator In The U.S.
As per a recent report by Merchant Medicine, CVS has a considerable lead with more than double the number of retail clinics compared to its closest competitor Walgreen. While CVS has over 800 MinuteClinics in 28 states, Walgreen operates just 388 clinics in 19 states. Additionally, the report claims that CVS continues to open clinics at a much faster pace than its competitors. Wal-Mart, Target and Kroger are some other company that run similar retail clinics. Operating 119 retail clinics, Kroger is ranked number three followed by Wal-Mart (92) and Target (70). 
CVS has provided medical care to over 20 million patients since the inception of MinuteClinic. It has approximately 2,200 nurse practitioners, providing high-quality, affordable, walk-in healthcare services, seven days a week, without any prior appointment. CVS also has clinical affiliations with more than 30 major health systems around the country. It added two new health system alliances in Q1 2014.
CVS is integrating its electronic records (with its affiliates) to allow for the transmission of clinical information between the systems, aiming to provide better care at lower costs. It recently moved to the Epic Electronic Medical Record, which allows it to better integrate records with other hospital and provider groups. The new system will enable CVS to respond more quickly to the needs of its patients by accelerating its ability to offer new services.Notes:
- CVS Caremark’s CEO Presents at UBS Global Healthcare Conference (Transcript), Seeking Alpha, May 20, 2014 [↩] [↩]
- CVS Doubles Up Walgreen In Retail Clinics As Obamacare Patients Seek Care, Forbes, June 5, 2014 [↩]