Walking the aisles of a CVS drugstore, there are piled paper towels, stacked cereal boxes, and neat lines of nail polish. In the back, there’s the pharmacy.
For years, that approach has remained essentially unchanged despite a creeping reality: Every time a customer hits “Add to Cart” on Amazon.com, the pharmacy chain’s thousands of square feet of retail floor space get a little less valuable. Meanwhile, the money Americans spend on health services keeps growing.
That’s why the back of the store is front and center as CVS Health Corp. gets ready to combine with health insurer Aetna Inc.
The $67.5 billion merger announced Dec. 3 will bring together 9,700 CVS stores and Aetna’s 22 million customers. A central plank of the deal is transforming the stores into health hubs where consumers can get care, pick up their drugs, buy some milk, and stay out of the hospital.
“Together, we plan to build an entirely new health care concept based on the principles of making care easier to use and more affordable,” CVS Chief Executive Officer Larry Merlo said on a Dec. 4 call with investors.
There are serious challenges to CVS’s proposal. Revamping the stores could cost several billion dollars. The company will have to change how millions of customers see a doctor or nurse. And it will have to fight decades of health care economics and patterns.
Drab But Busy
CVS is already the leader in drugstore-based clinics. At a CVS in Springfield, New Jersey, an unlit MinuteClinic sign in the store’s window is hard to see from the road after dark. The waiting area is four plastic chairs pressed up against the store’s back wall, near greeting cards and nail products. There are exam rooms off a short hall behind.
Despite the drab look, it’s busy. An hour before closing time, three women were waiting for appointments on a recent Tuesday evening. A couple who came in with their school-age daughter turned away after seeing a display on the check-in kiosk next to the pharmacy, which read: “We’ve got a full schedule today.”
While many stores are polished and inviting, revamping others will require significant overhauls, and CVS has said it may redirect some of its $2 billion in annual capital spending to the task. The company is also testing out vision and hearing services in a handful of locations and may eventually offer nutrition services.
The Aetna deal offers little in the way of traditional synergies, and whether it succeeds will depend on managing customers’ health, using in-store clinics and hubs to care for patients in lower-cost settings or stay on top of costly diseases.
As the companies envision it, individuals with a chronic disease like diabetes could get blood tests drawn or see a nutritionist in a store while picking up their medication. If they need it, they could then be guided to see a specialist or told when to return for a follow-up.
Most CVS clinics now are staffed by a single nurse practitioner at a time. Frances Prado, a nurse practitioner who previously worked at MinuteClinics in the Walnut Creek, California, area, said she had to do everything from ordering supplies and cleaning up to dealing with a customer’s insurance information.
Stef Woods made her first trip to a Washington, D.C., MinuteClinic when her four-year-old daughter Roya came down with a cold. Hoping to get a quick test for strep throat, Woods, a lecturer at American University, took Roya to a CVS on a Saturday morning, buying her a drink and a coloring book in the store as they waited.
“CVS is trying to fill a void,” she said. “There’s such a gap in access to care.”
While the clinics are convenient, there’s evidence that may come at a cost for the health care system. According to one study, patients take advantage of the convenience to use more services. Instead of waiting out a cold or the flu, they go see a clinician.