How CVS Evolved From A Retail Pharmacy To A Health Care Behemoth: Timeline

CVS Health Corporation (CVS) has become a pioneer in the pharmaceutical industry in the 21st century.

85 percent of Americans live within five miles of a CVS pharmacy, the company is the most profitable retail pharmacy in the United States, Rite Aid is worth about $200 million and Walgreens is worth $30.52 billion, and CVS's net worth is $3,104.57. billion by March 2023.

CVS has dominated the retail pharmaceutical industry and beyond through a series of acquisitions, mergers and joint venture-led operations.

The first buying wave.

Consumer Value Stores began as a health and beauty retailer in 1963 in Lowell, Massachusetts, before changing its name to CVS in 1963.

Then in 1967, pharmacies were incorporated into CVS stores, and the company was sold to the Melville Corporation two years later.

In the year By 1988, the chain had grown to 750 stores with sales of $1.2 billion. By 1994, however, CVS's pharmaceutical and medical products had become its main source of revenue.

That's when CVS unveiled PharmaCare, a pharmacy benefit management (PBM) company that acts as an intermediary between insurance companies and pharmaceutical manufacturers.

Later, as the Internet boom hit the country, CVS jumped at the chance and acquired Soma.com for $30 million. Soma was one of the first major digital pharmacy startups, and the acquisition put CVS on the digital map and allowed the company to launch its own website.

"The Internet is a logical extension of our business strategy to make life easier for our customers," said CEO Tom Ryan.

The ability of PBMs

In the year In 2006, CVS acquired Caremark, a PBM, and merged the company's operations with PharmaCare. CVS eventually became Caremark, one of three PBMs that now dominate the prescription drug market. In the year By 2022, CVS Caremark will lead with 34% market share, followed by Express Scripts with 24% and Optum Rx with 21%.

The Caremark deal was unique in that health insurers, not drug retailers, typically buy PBMs in a strategy known as vertical integration, in which a company acquires another company in the supply chain or industry and uses it for its own purposes. Choice.

Also in 2006, CVS acquired Minute Clinic for $170 million. That same year, the company generated $44 billion in annual revenue, 70 percent of which came from pharmacy sales alone. The business supported CVS during the Great Financial Crisis, and the company's stock has continued to outperform the broader S&P 500 for years.

Similarly, CVS' dominance in the PBM space has been attributed to the loss of smaller independent pharmacies through acquisitions and bankruptcy.

As "carriers," PBMs have the ability to influence or negotiate drug prices in partnership with pharmacies, health insurance companies, patients, manufacturers and, in some cases, the government.

This has sparked controversy over the lack of transparency in pricing and payment practices. The lack of price transparency has alarmed the Federal Trade Commission (FTC), which in June 2022 stepped in to investigate CVS Caremark and five other PBMs.

According to the FTC, the ongoing investigation is aimed at how PBMs direct insurance networks to their pharmacies, change drug price levels, manage reimbursement agreements with manufacturers and make the overall drug supply chain more profitable.

"While many people have never heard of pharmacy regulators, these powerful intermediaries have a significant impact on the U.S. prescription drug system," FTC Chairwoman Lena Hahn said in a statement. "This study sheds light on the practices of these companies and their impact on pharmacies, payers, physicians and patients."

The PBM problem is the driving force behind billionaire Mark Cuban's Cost Plus drug company.

"Health Destination"

As CVS became one of the top leaders in both the retail pharmacy and PBM space, the company decided to move further into the healthcare industry.

In August 2018, CVS Minute Clinic launched 24/7 online services, increasing market reach and revenue for CVS. Virtual tours start at $59 with insurance coverage options. A few months later, CVS officially purchased the health insurance company Aetna.

"CVS Pharmacy is transitioning from a pharmacy and grocery store to a health care store," current CVS CEO Larry Merlo said of the deal.

"The opportunities are amazing," Sachin Jain, CEO of SCAN Health Plan, told Yahoo Finance Live recently when asked if CVS is more than a pharmacy. “You have a business that owns an insurance division. It currently owns a business with a healthcare division and a retail pharmacy. So if you can get those parts to work together, that would be amazing."

© by Yahoo Finance. A man walks past a CVS Pharmacy in New York, Nov. 15, 2021. REUTERS/Andrew Kelly

A merger between CVS and Aetnas finally got the green light from the Justice Department in September 2019, despite concerns about reducing competition in the marketplace.

The American Medical Association (AMA) objected to Athena's arrangement to transfer its patients directly to CVS, arguing that "profits are speculative and PDD, health insurance, retail pharmacy, pharmacy specialty and pharmacy management benefits." The AMA also confirmed that health insurance premiums will increase.

The retailer's foray into healthcare continues apace with Amazon recently acquiring One Medical for $3.9 billion.

"These deals can change the industry," Jain said. "People have long hoped that retail and healthcare would have a better experience for patients. The caveat applies to the cultures of different retail and clinical services companies. And I think these deals have the potential to change healthcare in a big way...or be the worst in the history of the healthcare industry." You can."

"Open Businesses Don't Understand Clinical Culture".

In the year In 2020, as the coronavirus pandemic spread across the United States, all CVS properties were tested.

In the year In November 2021, CVS announced plans to close 900 of its stores over three years, with the promise of a "neighborhood CVS" replaced by Amazon Products ( AMZN ) at the door.

Despite this, the company's income remained stable, allowing for further acquisitions and partnerships.

CVS will acquire Signify Health ( SGFY ) for $8 billion in 2022 and has agreed to buy Oak Street Health ( OSH ) for $10 billion in 2023. Oak Street Health promotes its value-based economy as a provider of healthcare services for seniors.

"These numbers demonstrate the continued momentum of many leading pharma companies in fast-growing healthcare markets such as acute care, primary care and home health care," said Scott Dunn, senior healthcare analyst at CB Insights at Yahoo Finance.

At the same time, some experts worry that healthcare retail is going too far.

"I've been around the block to see that public organizations often don't understand clinical culture," Jain said of recent moves by Amazon and CVS. "They're making short-term decisions. And if they're making decisions to meet a quarterly revenue goal, they're not doing what's necessary to improve people's health long-term."

Anjali Hemlani contributed to this report.

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Tanya is a Yahoo Finance data reporter. Follow him on Twitter. @tanyakaushal00.

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