Why CVS Recent Deals Change the Specialty Landscape

Pharma/University Collaborations

Why CVS Recent Deals Change the Specialty Landscape – Following a similar path as in the late 1990’s with long term care pharmacy, specialty pharmacy has matured enough to undergo consolidation and roll-up into larger healthcare entities. Specialty represents a small distribution volume in the retail pharmacy space but also results in the greatest profit margin in a decreasing margin environment for pharmacies.

CVS’s Omnicare deal allows for different opportunities but mostly short-term complimentary growth and access to greater margins through a large specialty business.

The Target deal is a combination of short and long term impacts for both retailers.  Target CEO Brian Cornell said the exceedingly complex health-care business is not a good fit for Target, which lacks the scale and expertise to thrive in the pharmacy world. One casualty would be Diplomat Pharmacy who provided back-end specialty pharmacy services for Target.

The deal puts CVS in several new markets, including Seattle, Denver and Portland while shoring up other markets.  CVS also said it would open 20 new clinics in Target stores within three years of the deal’s closing.

How deal benefits CVS according to CVS.

  • Increase retail network sizeand gives access to the NW including key cities like Seattle, Portland, Denver and Salt Lake. Also strengthens position in cities like Milwaukee, Minneapolis, and St. Louis etc.
  • Long-term opportunity to grow together
  • New retail channel to provide our healthcare services
  • Seeing rise of healthcare consumerism
  • TGT guests will have access to CVS programs – MC, pharmacy advisor and Specialty Connect

 

Following the healthcare market shifts and impact of ACA implementation, applying principles of insurance and risk provides greater insight into the evolving world of health care stakeholders such as CVS Health or specialty pharmacy.  Size, specialty and consumerism are key components identified by CVS that make perfect sense in that context over the longer term but are also critical to business success today for the 2016 marketplace as well.  Yes its survival of the fittest, but also survival in a new business landscape requiring strategy in a marketplace that continues to change more frequently than the past thanks to how risk (and thereby control) has been shifted in the marketplace downstream to consumers.

Expect to see more specialty consolidation along with interesting bedfellows in upcoming deals through the summer.

 

About AMI:  Access Market Intelligence’s team is comprised of Thought Leaders, Innovators and Advisors who support/advise purchasers, providers, payers and industry manufacturers.  These individuals are on the front lines advancing concepts on health care reform, healthcare trends, healthcare policy, disseminating education through publications, participating on academic advisory boards to advance clinical and economic outcomes for healthcare.

 

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