CVS Caremark's 'ability' and 'agility' a key focus of 2013 Analyst Day
NEW YORK — Winning with ability and agility in the age of healthcare retail-ization. That’s what it is all about for CVS Caremark, and that was a central theme of Wednesday’s timely Analyst Day meeting in New York City, held just weeks before the New Year when health reform will begin to significantly alter the healthcare landscape.
Gathering at the Mandarin Oriental Hotel in New York City, analysts heard from key members of the executive team who outlined the company’s strategies to drive long-term enterprise growth through its vast pool of assets and its nimbleness in responding to the evolving health care landscape.
“I think today’s meeting is particularly timely given all that is happening in the healthcare industry as we enter 2014. As we are all acutely aware, the industry is undergoing its most transformative shift in decades and CVS Caremark is extremely well positioned to thrive in this changing healthcare landscape,” president and CEO Larry Merlo told analysts.
During the meeting, which was also webcast, Merlo took to the stage to provide a 30,000-foot view of the changing healthcare landscape and the company’s ability and agility to respond to these changes.
“Our ability is defined by the fact that we have brought together an unmatched breadth of assets and expertise to drive innovation. And that innovation has delivered results for our clients, our customers and for our shareholders,” said Merlo. “Our agility is rooted in the fact that, while we are laying out a clear direction and a long-term strategy, the marketplace is undergoing significant change. And we have the ability and nimbleness to respond to those changes while continuing to deliver strong results.”
It is this unique combination of ability and agility that positions the pharmacy innovation company to capitalize on the opportunities created by such changes within healthcare as coverage expansion and payor mix, the retailization of healthcare, a greater focus on cost and quality, and evolving pharmacy economics. And its integrated business model is proving successful in enhancing access to care, lowering costs and improving health outcomes.
As 2014 draws near, CVS Caremark has set its sights on driving enterprise growth.
By 2018, more than 30 million Americans will gain insurance and many more will face changes in their coverage. Employer-sponsored coverage is expected to remain relatively flat, with Medicare, Medicaid and individual purchased coverage facing rapid growth. The growth in these areas spells a rise in the importance of government, payors and health plans.
“When you look at government payors, our advantage comes from our strong positions in both the Medicare and Medicaid businesses across both our retail and PBM channels,” Merlo told analysts. “We made investments in building these businesses and you can see our significant share in these markets. Our ability to gain share of pharmacy spend across the enterprise from lives in our PDP and managed Medicaid business is a significant advantage over our standalone competitors. And we are especially well positioned to participate in coverage expansion through Medicaid as the leading PBM in the managed Medicaid market, along with our strong retail footprint in the majority of states that are expanding the Medicaid population.”
As it relates to health plans, the company is confident in its ability to grow market share through its existing PBM relationships. Today, there are more than 80 health plan clients representing about half of its PBM lives.
“The truly unique aspect of our model is the ability to support health plans through our assets across the enterprise, whether or not we’re the PBM,” Merlo added. “And our consumer expertise in this new business-to-consumer world of healthcare is being welcomed by health plans across the country.”
Private payor CareFirst, for example, is a new CVS Caremark client starting January 2014. CareFirst has developed a primary care medical home model that is focused on improving quality and lowering costs. The physician is measured on more than 20 quality and efficiency metrics and is given annual spending targets for their patient group. To further improve care and cost improvements, CareFirst is leveraging CVS Caremark’s capabilities.
“We have the ability to support the primary care physicians by improving quality and lowering overall health care costs for their patients through the work our enterprise assets can deliver,” said Jon Roberts, president of CVS Caremark Pharmacy Services, during his presentation. “We are in the process of integrating our technology platform, along with our retail pharmacies, mail, specialty pharmacies and MinuteClinic into CareFirst’s [iCentric network].”
Retailization of health care
“With the implementation of the Affordable Care Act and continued growth in Medicare we are seeing a rapid increase in the number of consumers choosing their own health plans,” Merlo told analysts.
In fact, in 2014 it is estimated that 2% to 3% of lives will be on the exchanges and this is projected to grow to 5% to 8% by 2016. By 2020, it is estimated that about 20% of consumers will be direct choosers of their health care purchasing. Meanwhile, many individuals will have more benefit design choices through employers.
This rise in consumers choosing their own health plans will mean a greater demand for transparency and value in the healthcare marketplace. And both consumers and plan sponsors will increasingly turn to tighter pharmacy management tools to help save money.
Enter the retailization of health care.
This is an area, in which CVS Caremark executives — with its decades of retail experience in a business-to-consumer environment, its channel-agnostic offerings (i.e. Maintenance Choice, Pharmacy Advisor and Specialty Connect), a growing footprint of conveniently located and low-cost MinuteClinic locations, and new digital capabilities that enable it to personlize the relationship with consumers — are quite confident in the company's ability to compete aggressively.
In touching upon the retailization of healthcare in his remarks, Roberts said, “The growth of private exchanges and the emergence of public exchanges will put the decision of plan choice directly into the hands of the consumer. … This increased consumer involvement will push payors and providers to provide more personalized and cost-effective solutons.”
Added Roberts, “CVS has a much deeper understanding of the consumer and what drives consumer behavior than anyone else in the PBM industry. Our unique model with more than 7,600 CVS drug stores along with our MinuteClinics puts us in contact with millions of healthcare consumers every year. … This consumer contact combined with our research partnerships with leading academic institutions arms us with unique, unmatched insights to design our marketing and member engagement strategies.”
Another trend playing out within the U.S. healthcare system is a much greater focus on cost and quality in the payor and provider communities as the shift toward an outcomes-based payment system continues. Meanwhile, narrow provider networks are gaining traction and payors are increasingly focused on controlling specialty trend.
So as the needs of payors and providers change and risk-sharing increases, CVS Caremark’s business model enables it to support payor and provider goals. Furthermore, the company’s s