Annual Report 2011
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Annual Report 2011 Trailblazer embarks on new chapter BY ANTOINETTE ALEXANDER nual meeting of shareholders in May. • Enhancing value for all of its sharehold- The decision to select Merlo as the new CEO ers in ways such as improving dividend Over the years, CVS Caremark has grown came as little surprise, as he has played a key payouts and share repurchases. from a go-getting New England-based regional role in the evolution of the company and has an “We certainly have the right assets in place player to a nearly $100 billion pharmacy health- impressive track record of integrating major ac- to continue to be a very successful company for care giant known for its vertically integrated quisitions. Under Merlo’s leadership, CVS com- years to come, and that is a real credit to [Tom pharmacy-PBM model via the 2007 acquisition pleted some of the most successful acquisitions Ryan’s] vision of the future of pharmacy health of Caremark, its highly successful loyalty card in the history of retail pharmacy — including care. Throughout his tenure, Tom has built a program and its innovative beauty concepts. Longs Drug stores, Osco/Sav-on, Eckerd and culture that is focused on innovation, customer Now, the industry trailblazer is embark- Revco — and delivered signifi cant organic C ONTINUED ON PAGE 2 ing on a new chapter with a new leader at the growth in major markets across the country. helm and a keen eye on driving medication Merlo has indicated that under his watch three Headquarters: Woonsocket, R.I. adherence, curbing rising healthcare costs and things will defi ne the company’s future success: 2010 sales: $96.4 billion* improving the health outcomes of its patients • Flawless execution of its strategy, which % change vs. 2009: -2.3% CVS nationwide with its far-reaching store network is lowering healthcare costs while im- No. of stores: 7,266* and arsenal of products and services. proving the health of its consumers and No. of MinuteClinic locations: 600+ Larry Merlo took the reigns as CEO on March leveraging its integrated pharmacy ser- 1, becoming CVS’ fourth CEO in the company’s vices model; * Includes pharmacy services segment revenue of $47.8 billion, total retail sales of $57.3 billion history. Tom Ryan retired as CEO after spending • Stressing more cross-functional thinking ** Retail stores as of June 30, 2011 36 years with the company, and had remained and action across the company, producing Source: Company reports nonexecutive chairman until the company’s an- even higher levels of customer service; and 1 • OCTOBER 2011 DRUGSTORENEWS.COM Annual Report 2011 New chapter C ONTINUED FROM PAGE 1 service and fl awless execution, and I certainly look forward to building upon his legacy,” Merlo told analysts in February. Merlo has clearly hit the ground run- ning, quickly extinguishing conjecture in the market place of potential plans to split up the company, outlining a fi ve-point plan for PBM profi t improvement and emphasizing the com- pany’s ability to “effectively compete” in the PBM industry. Year 2011 is slated to be the year the com- pany will break trends on top-line growth in the PBM, and 2012 is expected to be the year it breaks trends on profi t growth. “There are many reasons for optimism about our PBM’s long-term prospects, starting with its performance in 2012. First and fore- most, 2012 is expected to be the strongest year in generic [drug] launch history. ... Second, the streamlining benefi ts will begin to outweigh our investment costs; third, we will see a ramp in accretion from the Aetna contract; fourth, CVS Caremark will continue to focus on lowering healthcare costs while improving the health of its consumers and leveraging we anticipate continued growth in both spe- its integrated pharmacy services model. cialty and the Medicare Part D businesses; and fi fth, our focus on client service and satisfac- physician shortage. Just the Basics; the completion of more than tion, along with our innovative products and Aside from expanding its footprint and 200 Urban remodels in the past year; and the services, will provide continued momentum scope of service — through such offerings as implementation of the expanded consumables in renewal and new sales success,” Merlo told its monitoring services for patients with diabe- planogram in about 4,000 stores. analysts during February’s conference call. tes, high cholesterol, high blood pressure and Charged with integrating all the company’s Furthermore, CVS Caremark’s acquisition asthma — MinuteClinic also is forming a num- capabilities in branding, communications, of the Medicare Part D business of Universal ber of strategic affi liations with health systems healthcare-reform strategy, etc., to forge even American not only more than doubles the size to enhance the high-quality, affordable health- stronger partnerships and further improve of CVS Caremark’s Medicare Part D program, care services provided to patients and commu- pharmacy care delivery is ExtraCare loyalty but the move came just as the fi rst baby boomers nities across the country. program architect Helena Foulkes, who was turned 65 years old. However, that’s not to say that the front of recently named EVP and chief healthcare strat- MinuteClinic, which by 2015 is estimated to the store is not of great importance, as evi- egy and marketing offi cer. operate about 1,060 clinics in 100 markets, also denced by the continued focus on and success Clearly, Ryan’s retirement earlier this year will take on added signifi cance going forward of CVS’ ExtraCare loyalty program, which has marked not an end of an era, but rather the be- as 32 million uninsured gain coverage begin- been expanded with the new ExtraCare Beau- ginning of a new chapter for the Woonsocket, ning in 2014, amid an ongoing primary care ty Club; the rollout of a new store brand called R.I.-based powerhouse. “There are many reasons for optimism about our PBM’s long-term prospects, starting with its performance in 2012. First and foremost, 2012 is expected to be the strongest year in generic [drug] launch history. ” Larry Merlo, CVS Caremark 2 • OCTOBER 2011 DRUGSTORENEWS.COM Annual Report 2011 Merlo takes the helm Cosby ready to BY ANTOINETTE ALEXANDER markets across the country. Merlo, a pharmacist by train- lead retail biz CVS Caremark’s annual ing with more than 30 years in As of Oct. 1, Mark Cosby offi cially meeting of shareholders in May pharmacy health, joined CVS/ stepped into the role of president of was of special importance as it pharmacy in 1990 through the CVS/pharmacy. Cosby’s new stint at marked the offi cial retirement company’s acquisition of Peo- 1 CVS Dr. is a far cry from his prior of former chairman and CEO ple’s Drug. He began his career in role as president of Macy’s stores. Tom Ryan, who left the grow- chain pharmacy in 1978 with Peo- But Cosby’s reputation as an innova- ing company in the hands of a ple’s Drug in Washington, D.C. tor is bound to tie in nicely with the strong, capable new leader — Prior to being named presi- Woonsocket, R.I.-based trailblazer. Larry Merlo. dent and COO in May 2010, As president, Cosby will have “I’m passing [the company Merlo served as EVP of the com- responsibility for all aspects of the over] to a great leader, one pany and president of CVS/ company’s retail bus- whom I respect and who knows Larry Merlo pharmacy retail operations, iness, including its this business. Larry will take overseeing a portfolio of more more than 7,200 retail this company to great heights,” Ryan told share- than 7,000 CVS/pharmacy locations. stores, 19 distribu- holders in May. “After more than 20 years, I know this or- tion centers and e- The decision to select Merlo as the new CEO ganization, its values and our people’s pas- commerce site, as well came as little surprise, as he has played a key role sion for serving our customers,” Merlo said. as retail merchandis- in the evolution of the company and has an im- “We are building on a strong foundation. ing, supply chain, pressive track record of integrating major acquisi- CVS Caremark is the leader in providing in- marketing, real estate, tions. Under Merlo’s leadership, CVS completed tegrated pharmacy health care. No one else front store and phar- some of the most successful acquisitions in the has our combination of the largest chain of Mark Cosby macy operations. history of retail pharmacy — including Longs retail stores, a leading PBM, the fastest-grow- Prior to joining Macy’s in 2006, Drug stores, Osco/Sav-on, Eckerd and Revco — ing retail health clinics and a strong track re- Cosby served as president of full- and delivered signifi cant organic growth in major cord of health care innovation.” line stores for Sears Roebuck & Co., and earlier as COO of KFC . While at KFC, Cosby initiated the co-brand- Visionary Foulkes assumes new position ed stores with two eateries under Helena Foulkes, one of the brightest, fastest- ness results and stronger partnerships. the same roof. rising stars of the retail pharmacy industry for Building on her previous role as chief more than a decade, earlier this year assumed marketing executive of both retail pharmacy the newly created position of EVP and chief and the pharmacy benefi t manager , Foulkes healthcare strategy and marketing offi cer. brings insight from sales and operations into Bloom exits, This role undoubtedly is signifi cant as she her new role to engage an even broader array is charged with bringing together the compa- of external stakeholders.