CVS Health is clear that its primary mission is health care, an orientation that will only become more pronounced when its $77 billion acquisition of Aetna is finalized in the coming weeks. As the company continues to ramp up its already formidable array of capabilities in the field, there is a danger that some observers might lose sight of CVS’ roots as a retailer. The leaders of CVS Pharmacy, the 9,800-store drug chain that provided the foundation for the parent company to expand into pharmacy benefits management, in-store clinics, long-term care pharmacy and now health insurance, are determined to prevent that from occurring.
Founded in 1963 as a seller of health and beauty aids, CVS Pharmacy has always been characterized by a willingness to embrace innovation, a trait that is as much in evidence today as it’s ever been. As last month drew to a close, the retailer unveiled CarePass, a membership rewards program that is currently being tested at 350 stores in greater Boston.
A supplement to CVS’ highly successful ExtraCare loyalty plan, CarePass offers enrollees a range of benefits, both in-store and online. In return for a fee of $5 per month or $48 per year, people who sign up receive free one-to-two-day delivery of most prescription drug orders and eligible products on CVS.com; round-the-clock access to a pharmacist telephone help line; a 20% discount on merchandise sold under the CVS Health brand; and a monthly promotional reward of $10 that can be used for purchases in-store or on CVS.com.
“We are committed to designing and testing innovative programs that meet our customers’ health needs whenever, wherever and however they want,” said CVS Pharmacy president Kevin Hourican while announcing the initiative. “The CarePass pilot program in Boston offers our customers an additional level of benefits and services that make it easy to save time, save money and receive access to on-demand pharmacy care.”
CarePass was introduced to Bostonians with a certain degree of fanfare, including more than 20 pop-up events throughout the region. Hourican, who is also an executive vice president at CVS Health, promised consumers in other parts of the country more news about the program, including plans to take it to additional markets, after CVS has had a chance to assess its impact in the test market. He later told CNBC, “We want this to expand nationwide.”
As Hourican noted, CarePass is tailored to meet the evolving needs of consumers at a time when digital technology and e-commerce have changed the rules of the game for all retailers. From one perspective, the program can be seen as a preemptive strike against Amazon, whose real and prospective inroads into categories that have traditionally been the province of brick-and-mortar pharmacies have caused widespread jitters in the industry.
CarePass counters Amazon’s Prime service in several important respects. Facilitated through the U.S. Postal Service, the program puts CVS on a par with Amazon for delivery of nonpharmacy drug store products, as well as prescription medications, which the e-commerce company does not currently offer. (The edge that CVS has may, however, prove ephemeral, as Amazon’s recent purchase of PillPack indicates.) The discount on private label merchandise and monthly promotional rewards help address the price advantage that Amazon and other pure-play e-commerce companies are perceived to enjoy.
Perhaps the most significant thing CarePass accomplishes is tying customers more closely to CVS Pharmacy. As with Amazon Prime, the fee charged to be in the program gives participants the sense that they are invested in CVS and serves to generate repeat purchases whenever they go to buy drug store merchandise.
Leading-edge innovation is nothing new for CVS Pharmacy. The drug chain has pushed the envelope both at the front end and in the pharmacy of late. In April CVS launched the first installment in Beauty in Real Life, the company’s groundbreaking plan to bring consumers a more realistic image of beauty. Featuring a broad diversity of women, the campaign makes exclusive use of imagery that has not been digitally modified. Bearing the CVS Beauty Mark insignia, the ads focus on beauty care in real-life situations, enabling women, in the words of senior vice president and chief marketing officer Norm de Greve, to “feel good about themselves to feel comfortable and confident in their own skin.”
Earlier in the year, the company began the rollout of the ScriptPath Prescription Schedule, which brings together all of the medication data for a given patient that CVS has access to — including which drugs he or she takes, when they should be consumed and in what quantities — in order to present a regimen in an easy-to-understand format that makes use of icons. The program is intended to reduce nonadherence, a problem that is estimated to cost the American health care system some $300 billion a year.
“Patients who take their medications as prescribed have better health outcomes than those who do not,” Hourican said at the time. “By providing our patients with personalized information and guidance needed to manage their medications, and more importantly, making it easier to understand and follow prescribers’ directions, we can help them remain adherent and maintain their overall health.”
Those are just a few of many possible examples of CVS Pharmacy’s long-standing commitment to innovation. As long as Hourican and his colleagues uphold that tradition, the drug chain will likely remain the first thing that comes to mind for most consumers when they think about CVS Health.