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CVS helps Target customers stay healthy

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WESLEY CHAPEL, N.C. — The first six CVS pharmacies located inside Target Corp. stores celebrated a grand opening earlier this month in North Carolina.

CVS intends to convert all 1,672 Target pharmacies in 47 states to CVS/pharmacy locations over the next six to eight months and rebrand the 79 Target clinic locations as MinuteClinic, CVS Health’s retail clinic banner.

The North Carolina debut comes six weeks after CVS Health Corp. closed its $1.9 billion acquisition of Target Corp.’s pharmacy and retail health clinic business, a deal announced last summer.

When the deal closed, Target customers’ prescriptions and patient records were transferred to CVS, and some 14,000 Target pharmacy employees became CVS employees.

“We look forward to helping Target guests on their path to better health through CVS Health’s leading clinical programs, such as Maintenance Choice, Pharmacy Advisor and Specialty Connect,” Larry Merlo, CVS Health president and chief executive officer, said when the deal closed. “With the Target acquisition we will leverage our unique integrated business model and our scale to drive incremental sales volume and operating profit for the enterprise while providing convenience and cost savings to consumers and payers.”

The new pharmacies all come with updated digital tools meant to assist patients in managing their prescriptions, by scanning pill bottles to order refills of their prescriptions and receive medication reminders.

For Target, the sale allowed it to get out of a money-losing business while continuing to benefit from having in-store pharmacies that help drive traffic. Target said it would use the $1.2 billion in after-tax proceeds from the sale to invest in other strategic goals.

In addition, Target will receive $20 million to $25 million in annual rent payments from CVS. The sale reduces the company’s annual revenue by $4.2 billion (about 6% of overall sales) but should improve the retailer’s bottom line, analysts noted when the deal was announced.

“With the transition now under way, Target can further accelerate our commitment to wellness as a signature category, helping guests and team members in their efforts to eat better, be more active and find natural and clean label products,” said Brian Cornell, Target’s chairman and CEO.

With Target pharmacies in the fold, CVS stands as the largest U.S. chain drug retailer, with more than 9,500 retail pharmacies plus over 1,100 walk-in medical clinics.
CVS Health said it now has a presence in every state except Wyoming.

Walgreens Boots Alliance Inc., operator of the second-largest drug store chain in the United States (which includes Duane Reade stores), has more than 8,200 retail outlets in 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Walgreens, however, is poised to leapfrog CVS back into the No. 1 position with its $17.9 billion deal to acquire Rite Aid Corp., the third-largest U.S. drug chain.

A Walgreens-Rite Aid merger would create a pharmacy retailer with more than 12,800 stores.

The CVS conversion within Target’s stores will give Target shoppers access to CVS/pharmacy clinical programs designed to help customers achieve better medication adherence through greater convenience and enhanced counseling.

CVS has also committed to having a low-cost generic drug option available to Target’s cash-paying customers. And with MinuteClinic at Target stores, Target shoppers will have enhanced access to affordable medical care. CVS customers will gain the option of an expanded, one-stop-shopping experience when seeking health care services, company officials said.

“As we roll out the new CVS Pharmacy in Target stores, we will be working closely with patients to make their transition to our services and programs as simple and seamless as possible,” CVS/pharmacy president Helena Foulkes said in a statement. “CVS Pharmacy in Target stores will not only introduce new customers to our leading pharmacy care and innovative clinical programs, it will also introduce them to a set of digital tools to help them stay healthy.”

CVS reported that the acquisition widens its pharmacy footprint by about 20% and its clinic footprint by about 8%. The deal also brings CVS Pharmacy to several new markets, such as Seattle, Denver, Salt Lake City and Portland, Ore.

As Target builds new stores, CVS will run the pharmacies in them.

The CVS-Target relationship also unlocks joint development opportunities. Besides selecting sites for the small-format stores, CVS Health and Target will explore new market offerings that have the potential to generate strong returns on investment and offer long-term benefits for customers and communities, the companies said.

Cornell said last year that the relationship with CVS Health would help bring more TargetExpress locations to more ­communities.

Initial plans called for the companies to develop five to 10 of the small-format stores — each containing a CVS Pharmacy department — within two years.

And the companies said they aimed to open add as 20 new MinuteClinics at Target stores within three years.

Target said its Healthful pharmacy app would be gradually discontinued at each pharmacy as it converts to the CVS banner. Customers will then be directed to use CVS.com and its mobile app to refill prescriptions. CVS will introduce its own loyalty program at converted ­pharmacies.


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