Businessmodel of CVS Health

Customer Segments

CVS serves a broad range of customers related to the healthcare and pharmaceutical sectors. The Company’s Pharmacy Services segment provides a range of solutions, including prescription management and formulary management services, to a range of commercial and institutional clients:

• Commercial clients, including employers across multiple business sectors, as well as insurance companies with exposure to the healthcare sector; and
• Institutional and government clients, including various trade unions, government employee groups, health plans, managed Medicaid plans, and plans offered on the public exchanges. The Company also serves other sponsors of health benefit plans and individuals. CVS’s retail operations serve the genera consumer market through its chain of retail pharmacies, providing over-the-counter and medication drugs, as well as other consumer products, while its long-term care operations serve other customers within the healthcare and pharmaceutical sectors, notably chronic care facilities.

CVS serves customers across the US. It does not have any significant international operations.

Value Propositions

CVS provides value to its customers in the following ways:

• Its broad portfolio of services, with the Company providing an extensive range of pharmaceutical and clinical services to a broad spectrum of commercial and institutional clients, including medical plan design offerings and administration, formulary management, Medicare services, prescription management solutions, specialty pharmacy and infusion services;
• Its accessibility and domestic reach, with the Company having extensive operations across the US, including retail pharmacy, mail pharmacy, specialty pharmacy outlets, in addition to various digital channels and online platforms, such as its Caremark and MinuteClinic units;
• Its specialist expertise and industry experience, with the Company employing specialist personnel across its three operating segments, including trained pharmacists, nurses, and dieticians, as well as experience industry executives; and
• Its industry standing and reputation, with the Company established as a reliable and efficient pharmacy services provider to clients across the US. ### Channels

CVS operates a website at www.cvs.com, through which it provides information on its various solutions, services, and activities. The Company also operates dedicated websites for its Caremark, MinuteClinic, and Specialty offerings, which host various online channels that enable customers to pay bills, manage prescriptions, and track orders online. Other online pharmacy channels include Navarro.com and Onofre.com.br.  The Company also operates mail order pharmacy units – which utilise via post, telephone, fax, e-prescribing channels – and offers mobile apps for Android and iOS users.

CVS operates a chain of retail pharmacies across 49 US states. This comprises 9,655 retail stores, of which 7,897 are proprietary stores that operated a pharmacy and 1,672 are pharmacies located within Target stores. CVS also has specialist consulting teams as part of its long-term care operations, and operates approximately 1,100 walk-in medical clinics across the US, which are staffed by its workforce of nurse practitioners.

Customer Relationships

CVS provides a range solutions to clients on a self-service basis, notably through its Caremark and MinuteClinic channels, as well as online sales channels Navarro.com and Onofre.com.br. Through the Company’s digital platforms, clients are able to make orders, pay bills, track deliveries, and book appointments, among other functions, without interacting directly with members of the CVS workforce. Customers can similarly access self-service offerings through the Company’s mobile apps.

CVS’s retail pharmacy operations are also largely self-service, with trained clinical staff available to provide assistance and advice. The Company’s chain of clinics provides a more personalised services, with customers able to consult directly with nursing staff and receive custom treatment plans and advice. Similarly, the Company’s consulting team and pharmacy services teams consult directly with clients in order to establish a solution tailored to their individual needs and limitations.

CVS’s various channels offer online support resources to customers, including prescription help, health advice, and various articles. Customers are able to contact the relevant CVS team directly over the phone or through an online contact form, in order to receive a personalised response to enquiries and complaints. Additionally, the Company operates social media accounts with Facebook, Twitter, YouTube, and LinkedIn, through which it is able to interact with customers directly.

Key Activities

CVS, together with its subsidiaries, operates a provider of pharmacy services.

The Company organises its operations into three separate business segments: Pharmacy Services, which provides a range of pharmacy benefit management solutions; Retail/Long-Term Care, which operates retail pharmacies across the US, as well as providing consultancy, clinical care, and other chronic care services; and Corporate, which provides services in support of the company’s other operations.

The Company offers a range of products and services, including advising patients on their medications, introducing programs to help control costs for its clients, managing how care is delivered to patients with certain conditions, and providing specialist pharmacy care for the senior community.

Key Partners

CVS partners with various companies and organisations across its three operating divisions. These partners can be categorised broadly as:

• Public and Private Health Plan Partners, comprising a range of government-sponsored and private healthcare plans in the US, with which the Company collaborates in providing care to plan members;
• Supplier and Vendor Partners, comprising suppliers of tools, drugs, and equipment that are sold through the Company’s pharmacies or utilised in its facilities, as well as suppliers of services that are used in its pharmacies and clinics;
• Channel and distribution Partners, comprising various distribution and delivery providers that assist in the distribution of the Company’s pharmaceutical products; and
• Healthcare and Medical Partners, comprising various healthcare and medical technology companies, with which it works in providing care to patients and developing innovative healthcare solutions. CVS has launched a number of partnerships in recent years. This includes a deal with Curbside to develop the CVS Express digital service; a partnership with American Well, Doctor On Demand and Teladoc to identify ways in which telehealth providers and pharmacy operators can work together effectively; and a tie-up with MassChallenge and Rock Health to develop new healthcare solutions.

Key Resources

CVS’s key resources are its supply chain and product portfolio, its online platforms and technology, its IT and communications infrastructure, its physical chain of retail outlets and clinics, its telesales and mail order channels, its partnerships, and its personnel – notably its specialist pharmacy and nursing staff.

CVS owns and leases a number of properties across the US that are key to its operations. This includes a network of 9,623 retail stores, of which 4% are owned, as well as a network of walk-in clinics, and long-term care pharmacies. The Company also owns ten distribution centres, and leases a further 12. It also owns one mail order dispensary pharmacy, and leases a further four.

CVS has registered or applied to register a variety of trademarks and service marks, and considers its intellectual property to be of significant value to its Pharmacy Services and Retail/Long-Term Care segments. Searches of records published by the US Patent and Trademark Office identified two application field in the name of CVS Pharmacy, entitled ‘Bottle’ and ‘System and methods of providing pharmacy services’.

Cost Structure

CVS incurs costs in relation to the procurement of supplies and equipment, the development and maintenance of its digital platforms, the maintenance of its IT and communications infrastructure, the operation of its retail and clinic chains, the operation of its other sales channels, the management of its partnerships, and the retention of its personnel.

In 2015 CVS recorded cost of revenues, which includes cost associated with the acquisition of supplies, in the amount of $126.76 billion. The Company accrued total operating costs in the amount of $17.07 billion, including payroll costs, employee benefits, store occupancy costs, selling expenses, and advertising expenses.

Revenue Streams

CVS generates revenue through the provision of pharmacy services. This includes:

• Revenue derived from the sale of prescription and over-the-counter drugs, and other merchandise;
• Revenue derived from the provision of various consulting services, and pharmacy benefit management solutions; and
• Revenue derived from the provision of long-term care services, distribution services, and in-clinic patient care. In 2015 CVS generated annual net revenue of $153.29 billion, up on the $139.37 billion recorded by the Company the previous year. The Company’s Pharmacy Services segment is its largest revenue generator, accounting in 2015 for $100.36 billion in revenue. The Company’s Retail/Long-Term Care segment generated $72.01 billion for the year.