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/phar- macy 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. health care provider will likely result in stronger relationships with doctors and hospitals, creating an advantage of preference. The goal is that referrals for medication will be done through CVS and serve to boost reputation within all CVS segments. This, in conjunc- tion with its status as an ACO, puts CVS in a competitive position to attract newly insured Americans.

This decision spurred 24 state attorneys general to send letters to other pharmacy retailers, including Walmart Stores, Inc., Walgreens Co., and Rite Aid Corp., highlighting the contradiction of selling deadly products and health care services simultaneously. The letter also noted that drug store sales make it easier for younger age groups to begin smok- ing and more difficult for those trying to quit smoking. Walmart and Walgreens acknowl- edged the letter, but made no indication that they would stop selling tobacco products. Rite Aid responded by saying it will continue to sell both tobacco products as well as smoking cessation services, as the practice is legal. While this letter does not seem to have much of an influence on retailers, some speculate that it increases the pressure on the $100 billion tobacco industry, which is already facing decreasing sales, rising taxes, and smoking bans. For CVS, the decision affected its short-term profits and reduced each share by $0.06 to $0.09 each. Investors did not seem worried, however, as the long-term benefits will likely make up the difference.

CVS's new programs are encroaching on the medical industry by providing services to patients. As customers increasingly choose to visit local pharmacy clinics for aches, pains, or common illnesses, primary physicians are feeling the losses, especially since this sectors' health care professionals are dwindling. Choosing a retail pharmacy clinic over a physi- cian's office benefits the patient with lower costs and savings, which is a threat to traditional doctors' offices. Some groups are publicizing negative feedback on pharmacy care. For instance, the American Academy of Pediatrics issued a statement warning patients not to visit such clinics because they cannot offer the specialized care children need. Some groups argue that programs such as CVS's MinuteClinics do not offer the same caliber of service and care as a doctor. However, as stated above, CVS holds itself to a very high standard for care in trying to help patients be healthy. It continues to be accredited by the Joint Commission.

CVS MinuteClinics do recognize their limitations, however. Their website offers information to visitors regarding when they should and should not visit the clinics. For example, the website recommends that patients with severe symptoms such as chest pain, shortness of breath and difficulty breathing, poisoning, temperatures above 103 degrees Fahrenheit (for adults) and 104 (for children), and ailments requiring controlled substances should seek care elsewhere. MinuteClinics's staff nurse practitioners and physician assistants generally provide services for minor wounds, common illnesses, wellness tests, and physicals, etc. Other information regarding insurance and pricing are also available on the website.

CVS implemented the Values in Action program for employees, giving them a chance to recognize colleagues through online reward systems. Peers can nominate each other across the company for leadership traits and other commendable accomplishments. Each nomi- nation grants points, which can be redeemed for merchandise, travel, and more. Programs like these let employees know they are valued and empower them in their commitment to CVS. The Values in Action Breakthrough Awards is an annual company-wide broadcast that honors specific individuals exemplifying the company's values in innovation, collaboration, caring, integrity, and accountability.

CVS focuses strongly on compliance and integrity training for employees. The compli- ance and integrity training for employees is led by a compliance officer. Regular compliance education and training programs, a confidential 24/7 ethics hotline, and an efficient audit, response, and prevention process are components that make this program comprehensive. The company also supports the development of employees through professional development training sessions. The purpose of such training is not only to keep employees current on new technologies and processes but also to help them advance in their careers within the company.

CVS seeks to protect shareholder interests while maintaining broad stakeholder engage- ment. As a result, CVS carefully designed a comprehensive corporate governance system ranging from board independence to executive compensation. Following a corporate governance framework, a variety of specialized committees have been established with differ- ent functions for shareholders. From an information governance standpoint, the oversig

CVS has grown its ethical culture to include not only the company's functions but also the communities around it. Community engagement and philanthropic endeavors, for exam- ple, are long-standing commitments CVS has devoted time and resources toward devel- oping. Community partnerships have supported veteran hiring, scholarships to future pharmacists, and engaged high school, college, and postgraduate students' interest in science, technology, engineering, and math (STEM) careers. CVS believes that by helping to further advancements in providing the best health outcomes, it is investing in its current and future workforce.

CVS donates millions of dollars to various organizations and builds strategic partnerships with the awareness of healthy behaviors and educate the community on ways to become insured under the ACA. For instance, CVS has embarked upon a 5-year, $50 million initiative to fight against tobacco use. The company also offers free health screenings and flu shots for the uninsured, prescription discount card programs, and other community programs to supply individuals with the medications they need to maintain health. The discount card program saves customers over 70 percent on medications, resulting in millions of dollars in savings every year. Volunteerism is also supported by CVS, as employees are encouraged to form groups and obtain sponsorship from the company to address needs within the community. The amount of time that CVS employees volunteer for their communities is valued at $1.3 million.

CVS has developed a commitment called Prescription for a Better World, which encompasses its Code of Conduct, Supplier Ethics Policy, Supplier Diversity, and Supplier Audit Program to promote integrity, accountability, and diversity. These programs work to ensure that human rights are respected throughout the entire supply chain. In develop- ing these policies, CVS used principles initiated by the International Labor Organization and the United Nations' Universal Declaration of Human Rights. The human rights frame- work guides all suppliers of CVS to avoid unethical and illegal practices such as child labor, human trafficking, discrimination, and dangerous workplace conditions.

Environmental impact is also important to CVS. The company records its progress on this front in its annual Corporate Social Responsibility (CSR) Report. For instance, it has reduced its carbon intensity by 23 percent based on a baseline set in 2010. CVS opened its first Leadership in Energy and Environmental Design (LEED) Platinum store, which will serve as a test site to determine the most effective and relevant environmental innovations for the company's environmental operations goals. This information will be used to set best practices before constructing other stores.

CVS expanded its Energy Management System (EMS), which is designed to ISO (International Organization for Standardization) specifications. This digital system tracks and manages energy use, so that each store can be continually monitored and adjusted according to each location's needs. It is also in the process of upgrading lighting in the stores by including more energy-efficient bulbs. Increasing water use was identified as a significant inefficiency, and CVS has responded by eliminating irrigation at retail locations and opting for less water-intensive landscapes. Finally, CVS offers customers ways to recycle and properly dispose of expired, unused, or unwanted medications, which benefit both human and environmental well-being

CVS is implementing strategies and allocating resources in the hope of achieving an ethical culture that benefits all stakeholder groups. This helps CVS to maximize ethical decision making and remain sustainable for years to come. It seems the company has learned from previous ethical lapses by being aware of addiction problems within its communities. In 2014 CVS voluntarily opted to stop selling some cold medications in West Virginia and surrounding areas as more methamphetamine labs and corresponding stimulant abuse became more prominent throughout the state. The company's impact on the environment is one of the next big challenges it will have to overcome. As the largest pharmacy in the United States, CVS has a long way to go to reduce its overall footprint. However, the company is on the right track, having set goals and implementing action steps to achieve these goals. With the mission of helping people live healthier lives and innovating the pharmacy industry, CVS has a great responsibility in developing a business model allowing the company to remain competitive while acting ethically at the same time.

1. How has CVS handled its ethical challenges?

2. Evaluate CVS's decision to no longer sell tobacco products.

3. What is the future of CVS in positioning itself as a health care company based on its

decision to be socially responsible?

Answer rating: 100% (QA)

1 Handling Ethical Challenges CVS has addressed ethical challenges through various initiatives inclu... View the full answer