Ryan: Discount generics a response to economy, not competition

WOONSOCKET, R.I. —Looking to help uninsured patients struggling in today’s economic downturn, CVS Caremark has entered the discount generic drug program arena.

“We haven’t seen a material share loss to our competitor’s $4 generic program and that is still the case today, so the obvious question is, ‘Why now?’” Tom Ryan, CVS Caremark chairman, president and chief executive officer, told analysts during an Oct. 30 conference call to discuss third-quarter results and announce the program. “We are in the middle of an understated, difficult economic crisis to say the least. People are struggling with healthcare costs more than ever before, especially the under- and uninsured, and we felt it was the right time to offer a differentiated, affordable option.”

The program, which kicked off Nov. 9, enables consumers who obtain a CVS/pharmacy Health Savings Pass to fill a 90-day prescription for one of more than 400 common generic maintenance medications for $9.99 at a CVS pharmacy. The program has a $10 annual enrollment fee. Under the program, customers can earn CVS Extra Bucks with their Health Savings Pass.

In addition, the Savings Pass provides access to services and screenings at CVS’ MinuteClinic locations at a 10 percent discount for cash-paying patients.

At the end of the third quarter ended Sept. 27, the company operated 541 MinuteClinic locations in 27 states. By year-end, CVS expects to operate about 560 clinics. In other MinuteClinic news, Ryan noted during the call with analysts that it will leverage its retail advertising spend in an effort to further drive awareness and utilization of the clinics. In addition, a pilot program is under way to provide training for specialty customers on certain injectable medications, with a possible rollout in the second half of 2009.

CVS expected to experience some share gain and a boost in foot traffic as a result of the Health Savings Pass, not to mention the enrollment fee, so the program shouldn’t cost CVS more than a penny or so per share on an annual basis, according to Ryan.

To obtain a Health Savings Pass, consumers can call (888)-616-2273 or visit www.cvs.com/healthsavingspass. The site also lists the medications covered by the program.