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Case 19.2 CVS: Continuous Value Strategy In the United States, the retail pharmacy field is dominated by two large firms, Walgreens and CVS. CVS, the second largest pharmacy chain, is constantly competing against Walgreens for market share, especially in its quest to become more of a health-care management company. One way in which CVS attracts customers is through its pricing strategies. CVS employs price discounts through several methods, including in-store discounts. Retail stores often display discounted prices through the use of shelf signs on individual products. In addition, CVS mails coupons and store-wide purchase discounts to customers and offers a number of online discounts through CVS.com. When customers link their CVS ExtraCare cards to the company's myWeekly Ad website, they receive weekly sales updates. The ExtraCare card also gives customers access to personalized coupons in- store and through mobile apps. CVS provides other consumer sales promotions as well. For instance, customers can save money and get free shipping if they order their prescriptions through the mail with its CVS Caremark Mail Service Pharmacy. Its iSave program also helps consumers save on costs. In this program, CVS has partwered with more than 270,000 providers in different areas of health care. Customers who make appointments with these providers and identify themselves as iSave members can save money on these services. CVS's website also offers information on rebates for selected products. Additionally, CVS shows its commitment toward veterans with its Veterans Advantage program. Under this program, veterans can receive 20 percent discounts on products and free shipping on online orders. CVS's MinuteClinics are also important to consumers because they provide basic care at less cost than going to the doctor Many people visit MinuteClinics when they are sick or wish to get basic services such as flu shots. The clinics are staffed with certified nurse practitioners and physician assistants qualified in medicine. One major criticism against CVS's MinuteClinics is that customers might choose to go to the clinics when they have extreme illnesses rather than the hospital or doctor's office. However, the CVS MinuteClinic website contains information that describes their limitations and when consumers should visit their doctors. CVS's MinuteClinics accept most types of insurance and have had more than 37 million patient visits. CVS assists patients in another important albeit behind-the-scenes way. The company has been a tough negotiator when negotiating drug prices with pharmaceutical companies. CVS negotiates drug prices for more than 94 million people across the nation. Sometimes this has required CVS to take a tough stance and be willing to drop drugs from its insurance unless the drug makers lower the prices. For example, CVS dropped 26 drugs, including Viagra, from its prescription drug insurance in favor of comparable drugs with lower costs. An analysis has revealed that the attempts of drug makers to raise prices have been mitigated by the strong negotiation tactics of companies such as CVS and Express Scripts. During a time when some drug makers are raising the prices of medications 50-fold the use of negotiation is crucial toward keeping prices affordable for consumers. In 2015, CVS acquired Target's in-store pharmacy and clinic. This has raised some concerns that prices could increase for Target pharmacy customers. Whenever two large companies merge, there is less competition in the marketplace. Fins with more control could, therefore, raise prices. Some believe that the prices will increase for Target pharmacy customers because Target 45 a discount store has traditionally been more focused on koeping prices low than CVS has. However, others believe the merger might result in savings for the customer. Onc health industry economic analyst suggests that the merger of the two big firms will improve relationships with wholesalers and suppliers of drugs, which could result in cost savings that Co to P. 2 AA for consumers. In 2015, CVS acquired Target's in-store pharmacy and clinic. This has raised some concerns that prices could increase for Target pharmacy customers. Whenever two large companies merge, there is less competition in the marketplace. Firms with more control could, therefore, raise prices. Some believe that the prices will increase for Target pharmacy customers because Targetas a discount store has traditionally been more focused on keeping prices low than CVS has. However, others believe the merger might result in savings for the customer. One health industry economic analyst suggests that the merger of the two big firms will improve relationships with wholesalers and suppliers of drugs, which could result in cost savings that CVS could then pass on to the customer. It is clear that pharmacies such as CVS are important in negotiating prices of prescription drugs. The discounts and programs they offer are also important in helping consumers to afford their medications. The cost savings CVS has to offer has made it a popular pharmacy destination for American consumers. Questions for Discussion 1. Why is price competition such an issue for CVs as it rights to gain market share? 2. Describe ways CVS uses sales promotion techniques to provide price discounts. 3. Why is it important for CVS to negotiate with pharmaceutical companies on the prices of drugs