A Closer Look At CVS’s Retail Clinic Business: MinuteClinic

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CVS Health

Quick Take


  • CVS’s operates 640 MinuteClinic which provide affordable health care services within its drugstores.
  • The expected shortage of doctors in the near term are expected to increase footfall in the clinics.
  • CVS’s competitive advantage over clinics by Walgreen and Wal-Mart lies in the single location availability of drugstore and clinical services.
  • The scale of CVS’s operations help lower costs for the patient as compared to other locations. The costs can be as low as 40-80%.
  • Revenues from the MinuteClinic business were up 39% y-o-y in Q4 2012 and the growth is expected to continue in the near term.

CVS Caremark (NYSE:CVS) is the operator of the retail clinic, MinuteClinic, which offers walk-in health care service, seven days a week without prior appointment. With the number of insured patients expected to increase significantly in 2014, under the provisions of Patient Protection and Affordable Care Act 2011, or Obamacare as it is popularly known, we expect the doctors to be hard pressed attending to patients. The U.S. is already facing an acute shortage of doctors. This should benefit independent clinics such as MinuteClinic, operated by nurse practitioners and physician assistants who utilize recognized protocols to diagnose and treat minor health conditions, perform health screenings, monitor chronic conditions and deliver vaccinations. These practitioners are often licensed to write prescriptions that can be filled at the patient’s pharmacy of choice and to administer immunizations and other vaccines.

Currently, CVS operates about 640 MinuteClinics in comparison to approximately 7,500 of its drugstores. All three of CVS’s revenue stream stand to benefit from the growing popularity of MinuteClinics. As most of these clinics are located within CVS’ drugstores, they have the potential to boost same store sales over the counter sales and might lead to prescription transfers from other drugstores because of the inherent convenience of all the services being available at the same location. Here, we take a detailed look at how MinuteClinic is benefiting CVS’s business.

CVS Caremark’s closest competitor in retail clinic business are similar walk-in, in-store clinics operated by Walgreen (NYSE:WAG) and Wal-Mart (NYSE:WMT).

View our detailed analysis for CVS Caremark

Retail Clinics As Alternative To High-End Clinics For Minor Illnesses

Retail clinics are fast replacing high-end clinics as the first choice for treatment of minor illnesses. They also help address the growing shortage of primary care physicians by providing convenient access. These clinics are gradually expanding focus beyond acute, everyday ailments to provide wellness services and monitoring of chronic conditions. Additionally, the location of such clinics at large employer campuses such as a automobile manufacturing unit can provide primary-care services that allow employees and families to enjoy the full benefits of a dedicated physician in a convenient setting. The integration of such services with Pharmacy Benefits Management (PBM) plans also makes regular care affordable. Leading pharmacies, CVS and Walgreen have been pushing for such services in the recent past. Comprehensive healthcare service providers like CVS are expected to be the largest beneficiaries after certain provisions of Obamacare take effect in early 2014. An expected 30 million people will gain insurance coverage, and they are expected to turn to affordable healthcare options provided by the likes of CVS.

MinuteClinc – One Of The Biggest Fish In The Tank

CVS plans to operate about 1,000 clinics by 2016, and is well in line to achieve the target. It currently operates about 640 clinics across 25 states, which are manned by about 26,000 nurse practitioners and physician assistants. The company plans to open another 150 clinics in 2013, ending 2013 with about 800 clinics. CVS’s biggest competitive advantage lies in the integration of its Pharmacy Benefits Management and pharmacy services. The combination provides for a quick and affordable service, and has resulted in the clinics providing care to more than 10 million patients in the past five years.

Besides relying on its own PBM service, the company has also been tying up with other similar services to extend the reach of Minute Clinic. These tie-ups include both clinical and information system collaboration. The initiatives had positive results in the fourth quarter of 2012. The company reported that on a comparable basis sales were up more than 38%. The epidemic level of flu this year could see the growth accelerate in Q1 2013. [1]

Competition Has A Lot Of Ground To Cover

MinuteClinic’s primary competitors are Take Care Clinics operated by Walgreen from within its drugstores and similar clinics by Wal-Mart and Target. While MinuteClinic operates at about 630 locations, Take Care clinics operate at about 360 locations (as of August 31, 2012) and Wal-Mart at about 130. [2] The wide reach of CVS’s clinics vis-a-vis other clinics gives it a big head start in the battle for new prescriptions resulting from Obamacare in 2014.

Also, the company enjoys the advantage of wide operation scale which can result in significantly lower costs for customers. In its 2011 annual report, the company mentions a RAND study that found the cost of MinuteClinic services compared to physicians’ offices, urgent care, and emergency rooms was 40 to 80% lower than the other sites of care. Additionally, MinuteClinic users had 8% lower overall health care costs and their emergency room expenses were 12% lower. We believe that the considerable difference in prices are a result of the scale of operations and will support CVS’s case when these newly insured people make a choice between services.

We currently have a $53 Trefis price estimate for CVS Caremark stock, which is in line with the current market price.

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  1. Flu reaches epidemic level in U.S., says CDC, Reuters, January 2013 []
  2. Wal-Mart Clinics Trail CVS Reaping 39% Growth: Retail, Bloomberg, February 2012 []