CVS Gets Into Quick Clinic Biz
A report by the Star Tribune of Minneapolis/St. Paul says CVS will purchase MinuteClinic, the largest chain of in-store medical clinics in the U.S.
The purchase, reportedly for $170 million, is significant because operators of drugstores and other retail outlets have chosen to lease space to in-store clinics up to now rather
than operate them.
MinuteClinic, which has 83 in-store clinics in 10 states (66 in CVS stores), is looking to triple the number of locations it operates this year. The company said the CVS purchase
will enable it to exceed its earlier projection of having 500 clinics operating in stores by the end of next year.
“Our new relationship with CVS will allow us to accelerate the growth and refinement of the MinuteClinic concept,” CEO Michael Howe said.
MinuteClinic intends to continue opening clinics in stores other than CVS locations. The company presently has clinics operating in Cub Foods stores in the Minneapolis and St.
Paul area as well as other locations in the state and elsewhere.
The company has yet to turn a profit and sales for the past year are estimated to be in the $20 million range. Mr. Howe said the lack of profitability is due to the recent openings
of many clinics. He said that clinics operating for 18 months or more are all showing a profit.
Discussion Question: What are your thoughts on the strategic advantages/disadvantages of CVS purchasing MinuteClinic? Will CVS’ ownership of MinuteClinic
reduce its ability to open clinics in other retail operators’ locations?
CVS’ optimal strategy would be a MinuteClinic in every CVS location with adequate traffic, and physicians (not just nurses) in the highest volume locations. It would be an added profit for CVS to put the MinuteClinics into non CVS locations, but the investment will probably make money even if the locations were limited to CVS stores. Nonetheless, it might be odd that CVS is paying $2 million per existing MinuteClinic instead of starting its own version. My guess is that 7 years from now, all chain drug stores will have in-store clinics, although the clinic hours might be less than the store hours. Optimal career strategy: become a nurse pharmacist.
Very positive move for CVS, it’s important for CVS to enter this arena since grocery stores already are doing it. Branding it under the name Minute Clinic is very smart as it will give them leverage in both advertising and in negotiating with the groups who staff them. Long-term, if CVS can develop this brand nationally they will begin to negotiate user contracts with insurance carriers the same way they currently negotiate meds. Flip-side is, if I’m a local hospital or medical clinic looking to develop retail locations I would want them branded under my own name to allow me to do the same thing. In the end the winners will be those who have the best locations, and/ or are able to negotiate the best carrier contracts.
This is an excellent strategy for CVS. This allows them to ultimately make a CVS location a total health one-stop. Imagine, for non-serious life threatening illness, coming to CVS to see a physician, then getting the medication filled while you shop for other sundries. CVS is clearly a leader and innovator. I see down the road an alliance between the clinic division and the PharmaCare division to reduce healthcare costs for corporations.
I sense a glut of in-store clinics coming our way.
Everyone’s going to have a clinic, it’s a matter of which retailer is the best at branding it and keeping up simple but high quality care. I read the other day about one store starting to give meningitis shots. My advice — be careful what you offer.
Optimal career strategy: Open a pharmacy/nursing school.
This is one of those moves that should be positive for CVS’s store business but whether it is beneficial to MinuteClinic remains to be seen. It isn’t difficult to see other retailers shying away from MinuteClinic because of its association with CVS and leasing space in their stores to other clinic operators such as Take Care Health Systems, InterFit Health and others.