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Chapter 19: CVS: “Fired Up” about Social Responsibility: 19-3 Moving Toward a Health Care Company Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman ([email protected]) © 2019 Cengage Learning, Cengage Learning

19-3 Moving Toward a Health Care Company

Despite the ethical challenges CVS has experienced, it is trying to reposition itself as a

socially responsible organization that places priority on consumer health. Being a quality

health care company not only offers reputational benefits but financial advantages as well.

Changes in both the economic and health care landscape are creating new opportunities for

CVS to provide different programs and redefine itself. Trends including the declining number

of primary care physicians, the 16 million baby boomers who are becoming eligible for

Medicare benefits, and the more than 30 million newly insured Americans under the

Affordable Care Act (ACA) offer CVS an attractive market in which to expand. For example,

CVS has refocused its efforts on supplying the growing need for chronic disease

management that consumes costly resources when patients do not adhere to physician

recommended medications and monitoring methods to maintain health. PBM services are

being successfully implemented, including mail order, specialty pharmacy, plan design and

administration, formulary management, discounted drug purchase arrangements, and

disease management services.

Innovative programs such as Pharmacy Advisor and Maintenance Choice, developed in

collaboration with researchers from Harvard University and Brigham and Women’s Hospital,

help patients stay on their medications. Research shows that regular interaction between

patient and pharmacist increases the likelihood that patients will adhere to their medication

regimen. Many patients who take regular prescriptions often think that they are well enough

to cease taking their medication. However, when the symptoms of their ailments reappear,

the costs are great, both financially and medically. CVS’s programs allow the company to

inform patients about the benefits and risks of these effects through education and

awareness. The entire industry also benefits from this knowledge by preventing more costly

medical procedures due to medication non-adherence, which occurs when patients skip or

incorrectly take their dosage requirements. This is estimated to cost between $5 and $10 for

every $1 spent on adherence programs. These services are key components of CVS’s

competitive advantage, allowing it to provide the best possible patient care. It was also

proactive in preparing patients for Health Care Reform. For instance, CVS partnered with

the Centers for Medicare and Medicaid Services to raise awareness about new services

available to Medicare patients under the ACA.

To help people keep up with these and other changes in health care, CVS has established

its presence on social media and mobile devices. The company introduced a mobile

application allowing customers to conveniently refill prescriptions, while its Facebook and

Twitter pages provide helpful health tips. Customers benefit from using CVS’s digital tools

through increased savings and easier access to many of CVS’s services. For instance,

CVS’s iPad application allows individuals to have a 3D digital pharmacy experience

reminiscent of shopping in-store. Customers that are unable to physically visit the store, or

prefer the convenience of shopping from home, are able to partake in the CVS experience

through the company’s technology. With over 10 million registered users, many are saving

money and time filling and refilling prescriptions as well as having instant access to

essential drug information.

MinuteClinics are one of the major contributors to CVS’s rebranding efforts. These clinics

are the first in health care retail history to be accredited by the Joint Commission, the

national evaluation and certifying agency for health care organizations and programs in the

United States. This accreditation signifies the clinics’ commitment to and execution in

providing safe, quality health care that meets nationally set standards. In addition to health

care services, MinuteClinics provide smoking cessation and weight loss programs that

contribute positively to people’s health. These clinics are also the first retail clinic provider to

launch a partnership with the National Patient Safety Foundation for its health literacy

program to help improve patient education and community health.

Under the ACA, health care organizations are eligible to become members of the

Accountable Care Organizations (ACO) program. This program ensures that members are

accountable in providing quality health care to the sick as well as meeting certain standards

to provide health-conscious programs such as those related to smoking cessation and

weight loss. Accountability is measured by positive outcomes, resulting in cost savings,

which in turn is divided up among members to continue these effective programs and

services. There are at least 123 ACOs in the United States, and 480 ACOs have been

established as Medicare providers since the ACA went into effect—covering over 9 million

beneficiaries.

In 2015 CVS announced that it was purchasing Target’s 1,672 in-store pharmacies for $1.9

billion. These pharmacies were branded as CVS/pharmacy and remained located in Target

stores. About 80 Target clinics will be rebranded as MinuteClinics. This will increase CVS’s

reach significantly, particularly in areas like the Northwest where it does not have a strong

presence. Another benefit is that it will increase convenience for consumers who use CVS

for their prescriptions as they can now choose from a CVS drugstore or a CVS/pharmacy

within a Target location. Target pharmacies have generally received higher customer

satisfaction ratings compared to CVS. If CVS can tap into the same practices that Target

pharmacies have used to keep their customers satisfied, CVS could use what it learns to

adopt a more customer-centric culture that would provide it with an advantage over rivals

Walgreens and Rite Aid.

Despite CVS’s strides in becoming a health care company, competition from Walgreens has

been gaining. In 2017 Walgreens obtained an advantage in prescription management

contracts after the Tricare plan from the Department of Defense signed a deal with

Walgreens. This deal did not include CVS pharmacies. Walgreens Boots Alliance also made

a deal with PBM Prime Therapeutics to launch a specialty pharmacy and mail services

company called AllianceRx Walgreens Prime, further increasing the competitive threat to

CVS. However, CEO Larry Merlo claims that CVS is about to embark upon new drug

management programs. Combined with the acquisition of Target’s pharmacies, Merlo

believes CVS will gain an advantage over Walgreens and become more attractive to

patients and pharmacies. Insurers like Aetna and Anthem have also announced intentions

to partner with PBMs and pharmacies. Unlike CVS Walgreens is not itself a PBM, although

it is in talks to acquire competitor Rite Aid and Rite Aid’s PBM EnvisionRx. The competition

is likely to increase going forward as both firms try to gain the upper hand in this lucrative

industry.

Chapter 19: CVS: “Fired Up” about Social Responsibility: 19-3 Moving Toward a Health Care Company Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman ([email protected]) © 2019 Cengage Learning, Cengage Learning

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