WOONSOCKET, R.I. — CVS Health Corp. has taken ownership of Target Corp.’s pharmacies and clinics, making CVS/pharmacy the No. 1 drug chain by store count and sales.
With the closing of its $1.9 billion purchase of the assets, CVS has picked up Target’s 1,672 pharmacies across 47 states, giving it more than 9,500 prescription counters. Walgreens is now in second place with 8,173 pharmacies. (The acquisition of Rite Aid Corp. would put Walgreens back on top).
The Target acquisitions will be operated through a store-within-a-store format under the CVS banner. In addition, a CVS/pharmacy will be included in all new Target stores that offer pharmacy services. Seventy-nine Target clinics will be rebranded as MinuteClinic, and CVS will open up to 20 new clinics in Target stores within three years.
“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,” said CVS president and chief executive officer Larry Merlo. “In addition, 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.”
Target chairman and chief executive officer Brian Cornell called the deal “an important step in driving Target’s strategic priorities forward while giving our guests easy access to industry-leading health care services.”
“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,” he added.
When the deal was announced last spring, Cornell said that Target would get a financial windfall that will be invested in stores as the retailer focuses on its “signature categories” and “reinvents” its food offerings. He emphasized that he expects the CVS presence to boost store traffic and sales. Target customers will gain access to “best-in-class” pharmacy services, he said.
Target’s ability to compete in pharmacy and related health services is “constrained” by its relatively small scale and the complexities of the nation’s fast-changing health care system, Cornell said.
He added that Target is better off focusing on its turnaround plan, which aims to make the company more appealing to urban dwellers, younger families and Hispanics.
From polling of customers, Target learned that its credibility in the area of wellness would be enhanced by the presence of CVS in its stores, said John Mulligan, the discounter’s chief financial officer at the time the deal was announced and now its COO. Once operational costs are accounted for, Target loses money on its pharmacies, he noted.
The Target pharmacies and clinics will be transitioned to CVS banners and systems within six to eight months. They will give CVS an entry into five states — Alaska, Colorado, Idaho, Oregon and South Dakota — and a solid presence in new markets including Seattle; Denver; Portland, Ore.; and Salt Lake City. The company now has pharmacies in every state but Wyoming.
The acquisition “certainly grows our presence in existing CVS markets, but it also allows us to have a presence in new states,” CVS/pharmacy president Helena Foulkes said at the company’s Analyst Day. “The relationship is another example of how we are increasing patient access and investing in our core business to drive growth.”
CVS had said it was committed to offering comparable positions to the 14,000 Target employees who worked at the pharmacies and clinics.