CVS Health’s recent investor day brought an avalanche of announcements that buried a strong performance update with major overhauls to its pharmacy and services segments.
The CVS CostVantage drug pricing model stole the show, with CVS making the shift away from complex pricing formulas to a “cost plus” markup that’s far more transparent.
- Credit where credit’s due, Mark Cuban’s Cost Plus Drug Company put a ton of attention on the opaque pricing models used by most PBMs, prompting others like Cigna and CVS to reconsider their strategies (not to mention MCCPDC beat out CVS for Blue Shield of California back in August).
- We’ll now have to wait and see how much CVS CostVantage actually helps consumers, but given that CVS is vertically integrated with 9k+ retail pharmacies and the nation’s largest PBM in Caremark, the early verdict is that it might just reshuffle where revenue ends up. “It’s squeezing the balloon in one place and it gets bigger in another.”
The launch of the CVS Healthspire brand was a close runner-up, and the new moniker now encompasses the entire health services business that includes MinuteClinic, Caremark, Oak Street Health, Signify Health, and its recently formed biosimilar company Cordavis.
- The rebranding was probably overdue given CVS’ recent acquisition spree, and follows the lead of payor competitors with separate services arms like UnitedHealth Group (Optum), Cigna (Evernorth), and Elevance (Carelon).
- Expect CVS’ future investor presentations to have more cohesive reporting between the Healthspire businesses and Aetna, currently the third largest payor in the US with over 25M health plan members.
An upcoming smartphone app was also teased as a way to give patients a central hub for CVS services, such as prescription refills, information on deductibles, and MinuteClinic appointment scheduling. This well-narrated hype video has the quick overview.
The Takeaway
CVS is going all-in on unlocking the synergies between its core care delivery, pharmacy, and payor businesses. Given the sheer size of its footprint and breadth of its assets, CVS has plenty of ability to cross-promote services and increase the lifetime value of its customers. The question now is execution, but CVS’ grand plan seems to be gaining momentum following a full year of major moves.
