CVS Caremark

CVS Caremark Corporation

Type	Public (NYSE: CVS) S&P 500 Component
Founded	2007 through merger of CVS/pharmacy and Caremark
Headquarters	Woonsocket, Rhode Island, U.S.
Key people	Larry J. Merlo - President and CEO
Products	Retail - Pharmacy, Pharmacy Benefit Management
Revenue	$98.729 billion USD (2009)
Operating income	$6.438 billion USD (2009)
Net income	$3.696 billion USD (2009)
Employees	200,000 (2009)
Website	cvscaremark.com

CVS Caremark Corporation (NYSE: CVS) is an integrated pharmacy services provider, combining a United States pharmaceutical services company with a U.S. pharmacy chain. CVS Caremark provides pharmacy services through its over 7,000 CVS/pharmacy and Longs Drugs stores; its pharmacy benefit management, mail order and specialty pharmacy division, Caremark Pharmacy Services; its retail-based health clinic subsidiary, MinuteClinic; and its online pharmacy, CVS.com. CVS Caremark Corporation is chartered in Delaware, and is headquartered in Woonsocket, Rhode Island, where its pharmacy business is also headquartered. The pharmacy services business is headquartered in Nashville, Tennessee. The company was #18 in the 2010 Fortune 500 list of the largest companies in the U.S., and is the largest company that has operations solely in the United States.

Contents 1 Background 2 Name 2.1 CVS 2.2 Caremark 3 Acquisitions and growth 4 Community involvement 5 Private label 6 Controversies 6.1 Elensys 6.2 Boston prescriptions 6.3 Health & Medicare Fraud 6.4 Pharmaceutical Kickbacks 6.5 Deceptive Business Practices 6.6 CVS involvement in Rhode Island Senate corruption case 6.7 Business Practices Under Investigation 7 References 8 External links

Background

CVS Caremark has three operating segments: CVS/pharmacy, Caremark Pharmacy Services, and MinuteClinic, a walk in clinic that operates within CVS Pharmacy stores.

• CVS/pharmacy is one of the nation's largest retail pharmacy chains, with over 7,000 stores across 41 states. With more than 40 years in the retail pharmacy industry, CVS/pharmacy generates over 68% of its revenue from the pharmacy business. CVS/pharmacy fills more than one of every seven retail prescriptions in America and one of every five in their own markets. Their ExtraCare program boasts over 65 million cardholders, making it the largest retail loyalty program in the country.

• CVS Caremark Pharmacy Services, one of the nation's leading pharmacy benefit management (PBM) companies, provides comprehensive prescription benefit management services to over 2,000 health plans, including corporations, managed care organizations, insurance companies, unions and government entities. With net revenue of approximately $37 billion (including approximately $5.8 billion of retail copayments) in 2006, they are also one of the largest PBMs. Caremark operates a national retail pharmacy network with over 60,000 participating pharmacies, as well as 11 mail service pharmacies. Its call centers have been recognized for customer satisfaction excellence by J.D. Power & Associates (J.D. Power & Associates is also a client of Caremark). Caremark operates over 70 specialty pharmacies, and its specialty pharmacies have been accredited by the Joint Commission. Its disease management programs through Accordant(R) have also been accredited by the National Committee for Quality Assurance.

• MinuteClinic is the nation's largest walk-in medical clinic, with 570 locations in 25 states.

Name

CVS Caremark began as Melville Corporation, formerly based in Rye, New York.

CVS

The CVS name once stood for Consumer Value Stores; though Thomas Ryan, CVS Caremark's former CEO, has said he now considers it to stand for "Convenience, Value and Service".^[1]

Caremark

Caremark was established in 1979 as Home Health Care of America, and changed its name to Caremark in 1985. In 1987, Caremark was acquired by, then became a subsidiary of, Baxter International. In 1992, however, Baxter spun off Caremark as a public company. In 1996, Caremark then merged with Birmingham, Alabama based MedPartners/Mullikin, Inc., with the combined company being called MedPartners, Inc.. In 1998, MedPartners changed its name to Caremark Rx.^[2]

Acquisitions and growth

• The first CVS store, selling health and beauty products, was founded in Lowell, Mass. by brothers Stanley and Sidney Goldstein and partner Ralph Hoagland in 1963.

• In 1964, CVS had 17 stores that sold primarily health and beauty products.^[3]

• In 1967, CVS began operation of its first stores with pharmacy departments, opening locations in Warwick and Cumberland, R.I.

• In 1969, CVS was sold to Melville Corporation.

• By 1970, CVS operated 100 stores in New England and the Northeast.

• In 1972, CVS nearly doubled in size with its acquisition of 84 Clinton Drug and Discount Stores. The purchase introduced CVS to the Midwest with stores in Indiana.

• In 1977, CVS acquired the 36-store New Jersey–based Mack Drug chain.

• In 1980, CVS became the 15th largest pharmacy chain in the U.S. with 408 stores and $414 million in sales.

• In 1988, CVS celebrated its 25th anniversary, finishing the year with nearly 750 stores and sales of about $1.6 billion.

• Since 1990, CVS has been rapidly growing in order to become a national drug store chain.

• In 1990, CVS acquired 500-store Peoples Drug, which established the company in new mid-Atlantic markets including Washington, D.C., Pennsylvania, Maryland and Virginia. Peoples Drug stores were converted into CVS stores in May 1994.

• In 1994, CVS launched PharmaCare, a pharmacy benefit management (PBM) company providing a wide range of services to employers, managed care organizations, insurance companies, unions and government agencies.

• At the beginning of 1996, CVS was a division of Melville Corporation. During that year, Melville Corporation divested their other retail companies such as Linens 'N Things, KB Toys, Foot Action, and Marshalls. Following the divestment, Melville changed their name to CVS Corporation and traded on the New York Stock Exchange with the symbol "CVS".

• During 1997, when it had about 1,400 stores, CVS doubled its size by purchasing the much larger Revco drug stores, which had over 2,500 stores. Revco brought CVS into the Ohio Valley and Southeastern U.S.; previously CVS' footprint had not been south of Virginia CVS could afford such a large purchase because of its recent Melville divesture.

• Also in 1997, CVS ProCare was established as a specialty pharmacy subsidiary of CVS.

• In 1998, CVS acquired 207 stores from Arbor Drugs, bringing its store total to 4,100 across 24 states. The transaction gave CVS its first stores in Michigan and the instant lead in the highly competitive Detroit market.

• In 1999, CVS acquired Soma.com, the first online pharmacy, and renamed it CVS.com to become the first fully integrated online and brick-and-mortar pharmacy offering to consumers.

• In 2000 CVS acquired Stadtlander pharmacy from Bergen Brunswig Corporation for an undisclosed cash price. This made CVS ProCare the largest specialty pharmacy in the U.S. at the time. The transaction also included a distribution agreement that called for Bergen Brunswig to provide ProCare with $2.5 billion of pharmaceuticals over the next five years.

• CVS has also been expanding its store base through new store openings. CVS entered the Chicago market in 2001, which at the time was dominated by Walgreens. In 2004, it has entered the California market, which was dominated by Longs Drugs, Rite Aid, and Walgreens. It opened stores in Las Vegas, Nevada, Houston, Texas, and Dallas, Texas, right before its purchase of Eckerd. CVS has also begun to open stores in Arizona.

• In 2004, CVS purchased 1,268 Eckerd drug stores and Eckerd Health Services, Eckerd’s PBM/Mail-order pharmacy business, from JCPenney. Most of the former Eckerd stores that CVS purchased (and converted into CVS stores) were in Florida and Texas. Since JCPenney credit cards were accepted at Eckerd drugs stores, they have been continued to be used at CVS.

• Also in 2004, CVS ProCare became part of PharmaCare. All ProCare stores were re-branded as PharmaCare stores.

• On January 23, 2006, CVS announced that it had agreed to acquire the freestanding drug store operations of supermarket chain Albertsons. The deal included the acquisition of 700 drug stores trading under the Osco Drug and Sav-On Drugs banners, mostly in the Midwest and Southwestern United States with primary concentration of stores in Southern California and Northern Illinois; and was formally completed on June 2, 2006. Transition of Sav-On and Osco stores to the CVS brand began shortly thereafter, and was completed by December 2006. CVS now dominates the Southern California market. Also included were Albertsons Health'n'Home (now CVS Home Health) durable medical equipment (DME) stores. Approximately 28 CVS Home Health locations are present in Arizona, California and the Kansas City area, representing CVS' first venture into the specialized DME market.

CVS had previously operated stores in southern California and completely withdrew from the market in 1993. CVS sold virtually all the locations to American Drug Stores, the drug store division of American Stores Company. American Stores operated its drug stores in southern California as Sav-on Drugs. Ironically, many of the stores in Southern California that CVS acquired were stores that CVS had formerly owned. At the time CVS bought the stores back, Sav-on operated them as Sav-on Express stores. The Express name was used by Sav-on to help customers identify those stores that did not carry all lines of merchandise as compared to the larger traditional Sav-on Drugs location, hence the name Sav-on Express. As a result of the acquisition, the chain now operates over 6,200 stores in 43 states and the District of Columbia.^[4]

• On July 13, 2006, CVS announced that it had entered into a definitive agreement to acquire Minneapolis-based MinuteClinic, the pioneer and largest provider of retail-based health clinics in the U.S. MinuteClinic operates as a wholly owned subsidiary of CVS Corporation. MinuteClinic health care centers are staffed by board-certified nurse practitioners and physician assistants who are trained to diagnose, treat and provide prescriptions (when clinically appropriate) for common family illnesses such as strep throat and ear, eye, sinus, bladder and bronchial infections. MinuteClinic also offers common vaccinations, such as flu shots, tetanus, and Hepatitis A & B. The clinics are also supported by physicians who collaborate with the nurse practitioners to assure the highest quality of care. CVS plans to have 400 MinuteClinics by the end of 2007, most of which within CVS/pharmacy locations, and are targeting a total of about 2,500.^[5]

• During Fall 2006, Caremark Rx, a pharmacy benefits management [PBM] company, was facing fierce acquisition from Express Scripts, an opposing PBM. CVS/Pharmacy entered into the sale, offering a cash/stock mix, board seats, and a merge with CVS's existing Pharmacare PBM. Though touted as a merger, CVS acquired Caremark Rx on March 22, 2007 renaming the company CVS Caremark Corp. and the corporate headquarters remained in Woonsocket, RI. The pharmacy services business, including the combined pharmacy benefits management (PBM), specialty pharmacy, and disease management businesses, is headquartered in Nashville, TN. Tom Ryan, the Chairman & CEO of CVS remained president and CEO of CVS Caremark Corporation, while Caremark's Edwin Crawford became the Chairman of the Board. On November 7, 2007 Edwin Crawford quit his position, and Tom Ryan was again named Chairman of the Board.

• On August 12, 2008 CVS announced that they would acquire Longs Drugs Stores Corp., in a $2.9 billion deal. Longs operates 521 stores in the Western United States, 41 of these stores in Hawaii alone, with a heavy concentration in California. This will strengthen the 2006 acquisition by CVS of Sav-On Drugs, also primarily in California and now operating under the CVS brand. CVS will also enter the Hawaiian market which it did not previously operate, and retain the well-established Longs name there. This deal is estimated to bring over $100 million a year in cost savings to the combined company. It closed October 30, 2008.

• On November 3, 2008 CVS opens their first Beauty 360 store in Washington, DC. Beauty 360 features a wide range of prestige and niche beauty brands from the skincare, cosmetics, men's grooming and fragrance categories. Staffed with trained and licensed professionals, they offer brand-specific services including mini-manicures, express facials, hand massages and make-up application. CVS expects to open about 50 Beauty 360 stores by the end of 2009, with the majority of the stores being located adjacent to existing CVS/pharmacy locations.^[6]

Community involvement

• The CVS Caremark Charitable Trust was established to provide funding for health care, education and community involvement initiatives in communities where CVS/pharmacy stores are located.^[7]

• Since 1978, CVS Samaritan Vans have provided free roadside assistance to motorists and the community in numerous cities. They are "emergency response vehicles" that patrol select major freeways of Chicago, Charlotte, Cincinnati, Cleveland, Boston, Detroit, Indianapolis, Providence and Washington, D.C. in search of motorists in need. The drivers have a multitude of talents and certifications. They are Nationally Certified Auto Mechanics, State Certified Emergency Medical Technicians (EMTs) or Paramedics, and Nationally Certified Animal Control Officers. They are capable of making numerous on-site auto repairs, administering medical help, calming a tense situation or using their communication equipment to summon the state police or other assistance. Each year, the CVS Samaritan Vans travel about 600,000 miles (970,000 km), checking and assisting nearly 50,000 people, and responding to more than 61,000 roadway incidents.

• Played at the Rhode Island Country Club, the CVS Caremark Charity Classic was established to raise money for the support of non-profit agencies throughout New England. Since 1999, it has raised over $8 million for charity. The event has featured golf legends such as Arnold Palmer, Jack Nicklaus, Hale Irwin, and Gary Player along with today's top stars like David Duval, Chris DiMarco, Davis Love III, & Scott McCarron.^[8]

Private label

CVS has an extensive assortment of various private labels and proprietary brands. In addition to CVS Brand, CVS also carries exclusive store brands under the names of Just the Basics, Essence of Beauty, Gold Emblem, Absolutely Divine, Blade, Earth Essentials, Caliber, and Life Fitness. CVS also holds exclusive contracts to sell proprietary brands such as Nuprin, Christophe, PreVentin-AT, 24/7, Skin Effects, and the European brand Lumene. A new exclusive Playskool line of baby care is also in CVS stores. CVS was also first to sell single-use digital cameras and camcorders from Pure Digital. The acquisition of the SavOn/Osco stores from the Albertson's chain provided CVS with its first opportunity for private label spirits. At a meeting for acquisition trainers, Larry Merlo reported Tom Ryan's enthusiasm, quoting, "I am not signing my name on a bottle of vodka!" ^[9]

Controversies

Elensys

In 1998, the Washington Post reported that CVS Corporation appeared to be sharing prescription drug information with the Woburn-based marketing company, Elensys. According to the Post, Elensys received information on specific prescription drugs that individual CVS customers had purchased and used this information to send targeted direct mailings urging customers to renew prescriptions and promoting other products in which they might be interested. CVS and Elensys argued that there were no privacy issues because Elensys was acting solely as a contractor to CVS, and because the purpose of the mailings was to educate consumers. CVS claimed that it never shared customers' medical histories with Elensys (despite the Washington Post's indirect evidence that they had). George D. Lundberg, editor of the Journal of the American Medical Association, called the practice "a gross invasion" of privacy. Following a firestorm of criticism and complaints by consumers, CVS discontinued the relationship with Elensys, and moved the practice in-house.

Boston prescriptions

During 2005 a rash of prescription mistakes came to light in some of CVS Corporation's Boston-area stores. An investigation confirmed 62 errors or quality problems going back to 2002. In February 2006, the state Board of Pharmacy announced that the non-profit Institute for Safe Medication Practices (ISMP) would monitor all Massachusetts stores for the next two years.^[10]

Health & Medicare Fraud

In the late 1980s and early 1990s Caremark RX was involved in a number of health fraud and Medicare fraud scandals.^[11][12] The combined price to settle this dispute with the U.S. Government cost the company over $250,000,000.^[13]

Pharmaceutical Kickbacks

In 2005, Caremark RX paid $137.5 million to settle federal lawsuits filed by whistle-blowers that accused a company it acquired in 2003 of improper dealings with pharmaceutical manufacturers.

The lawsuits said that the acquired company, AdvancePCS, accepted kickbacks from drug makers to promote their products over those of rivals under contracts with government programs including the Federal Employees Health Benefit Program, the Mail Handlers Health Benefit Program and Medicare health maintenance plans.

There was no admission of wrongdoing by Caremark or AdvancePCS.

CVS Caremark Corp. has changed their practices. The formulary revision process considers manufacturer rebates, payments from drug manufacturers for low placement on PBM formularies, along with average warehoused price (AWP), drug availability, and bulk discounts when choosing at which co-pay a brand name drug should be placed.^[14]

Deceptive Business Practices

In February 2008, CVS settled a large civil lawsuit for deceptive business practices. The Kaiser Family Foundation reported:^[15]

CVS has agreed to a a $38.5 million settlement in a multi-state civil deceptive-practices lawsuit against pharmacy benefit manager Caremark filed by 28 attorneys general, the Chicago Tribune reports.^[16] The attorneys general, led by Lisa Madigan (D) of Illinois and Douglas Ganslar (D) of Maryland, allege that Caremark "engaged in deceptive business practices" by informing physicians that patients or health plans could save money if patients were switched to certain brand-name prescription drugs (Miller, Chicago Tribune, 2/14).^[16]

However, the switch often saved patients and health plans only small amounts or increased their costs, while increasing Caremark's profits, Connecticut Attorney General Richard Blumenthal (D) said (Levick, Hartford Courant, 2/15).^[17] Pennsylvania Attorney General Tom Corbett (R) said the PBM ^[18] kept discounts and rebates that should have been passed on to employers and patients (Levy, AP/San Francisco Chronicle, 2/14).^[19] In addition, Caremark did not "adequately inform doctors" of the full financial effect of the switch and did not disclose that the switch would increase Caremark's profits, the lawsuit alleges (Chicago Tribune, 2/14).^[16]

...The settlement prohibits CVS from requesting prescription drug switches in certain cases, such as when the cost to the patient would be higher with the new prescription drug; when the original prescription drug's patent will expire within six months; and when patients were switched from a similar prescription drug within the previous two years (Hartford Courant, 2/15).^[17] Patients also have the ability to decline a switch from the prescribed treatment to the prescription offered by the pharmacy under the settlement, Madigan said (Bloomberg News/Philadelphia Inquirer, 2/15).^[19]

CVS involvement in Rhode Island Senate corruption case

In 2008, two former CVS executives, John R. “Jack” Kramer and Carlos Ortiz, were charged with 20 counts of mail fraud, bribery and conspiracy in relation to Operation Dollar Bill, a probe of corruption in the Rhode Island General Assembly. Kramer and Ortiz hired former State Senator John Celona, who currently is serving 2½ years on corruption charges involving CVS and other companies, as a media consultant for $12,000 a year. Celona was known for walking out on a pharmacy choice vote in the state senate while on the CVS payroll. Despite originally claiming CVS never bought any favors in his own trial, he testified against Kramer and Ortiz as the prosecution's star witness. On May 31, 2008, Kramer and Ortiz were acquitted on all counts. One juror went on the record as saying “My perception living in Rhode Island all my life is, ‘Yeah, this probably did go on,’ but I didn't see any proof beyond a reasonable doubt that CVS did this.”^[20]

Business Practices Under Investigation

On May 4, 2010, CVS Caremark Corp. announced that its business practices were being investigated by a group of 24 states, along with the District of Columbia and Los Angeles County. At issue is the post-merger relationship between CVS and Caremark. In addition, the company had earlier acknowledged in a filing with the Securities and Exchange Commission (SEC) that it had received a subpoena from the Office of Inspector General of the United States Department of Health and Human Services, requiring the company to provide information regarding the incentives the company provides to customers who transfer their prescriptions to CVS, including gift cards, goods and other incentives.^[21]

References

External links

• CVS/pharmacy e-commerce site
• CVS Caremark Corporation site
• Caremark home page
• MinuteClinic home page