separator Health Economist header


Chief Medical Officer Provides New Insights in Penn Talk

CVS Chief Medical Officer Troy Brennan discussed the company's strategy at a Leonard Davis Institute of Health Economics (LDI) health policy seminar at The Wharton School.

The recent CVS decision to jettison tobacco sales was less about tobacco and more about the company's long-term plan to "creep inside" the health care delivery system, Chief Medical Officer Troy Brennan told a seminar at the University of Pennsylvania.
In September, CVS, the second largest U.S. retail pharmacy company, both changed its name to CVS Health and announced it
CVS tobacco
Photo: AP (click larger)
National ads and public displays accompanied CVS's tobacco-free announcement.
would cease selling the tobacco products that accounted for $2 billion of its $132 billion annual revenues.

It said tobacco products were incompatible with its ongoing effort to evolve into more of a health care delivery company. It previously announced that it has established business relationships with more than two-dozen large health systems including the Cleveland Clinic.

At a health policy seminar in the University of Pennsylvania Wharton School's Huntsman Hall sponsored by the Leonard Davis Institute of Health Economics (LDI) and its Center for Health Incentives and Behavioral Economics (CHIBE), Brennan provided additional insights into company's reorganization activities and vision. These include:

  • Continuing to move away from the use of in-store space for supermarket-like product sales in favor new sorts of health care-related services and products.
  • Dramatically expanding the number of in-store Minute Clinics to function as a national health care delivery system for large employers.
  • Negotiations with primary care physicians and their professional organizations aimed at finding ways local doctors and CVS' Minute Clinics can cooperate and coordinate patient care.
  • Developing closer business ties with individual physicians aimed at getting them to actively encourage their patients to fill prescriptions at CVS pharmacies.
  • Developing aggressive medication adherence services and strategies that can drive more chronically ill patients to refill more prescriptions.
  • Focusing more on new high-profit specialty drugs.
  • Working with laboratory technology companies to develop in-store mini-labs capable of processing all blood work for diseases such as hepatitis-C.

Strategic structure
Brennan, MD, JD, MPH, the former Chief Medical Office of Aetna, Inc., and CEO of Brigham and Women's Physician's Organization, joined CVS six years ago. He said he realized then that retail pharmacies had always operated on the outside of the health care delivery system but that CVS had a strategic structure that could enable it to "creep" in and become an integral part of that delivery system.

CVS, the country's second largest pharmacy chain operates nearly 7,800 retail outlets that include a pharmacy operation in the back and a 'mini-mart' selling food staples, candy, toys, cosmetics, seasonal decorations, electronics and other consumer products up front.

Brennan said it's commonly believed that CVS has a pharmacy in the back to lure people through the front of the store, whose product sales are the real goal. But the opposite is true and, in fact, he said front-store sales account for only "30% going down to 20%" of total store revenue and that percentage will continue to decline.

'Fairly disruptive strategy'
"The front store is designed to be convenient for people to get in and out of easily," he said. "At the same time, it seemed to me that the direction health care is going -- exchanges, individual policies, high deductible plans -- is very oriented to a consumer approach. So, the idea of making consumer health care available in a really convenient way seemed a fairly disruptive strategy, especially when you have this front store space of between 6,000 to 20,000 square feet."

When Brennan first arrived, CVS was in the midst of experimenting with small in-store clinics staffed by nurse practitioners. That initial "Minute Clinic" program wasn't profitable and was being trimmed back.

It has since been reinvigorated and accelerated as a core element of the CVS reorganization plan, which is currently adding four new in-store clinics every week and plans to continue at that pace "for a couple" years until it has 2,000 of them across the country, Brennan said. He noted that this critical mass gives CVS the potential to provide various sorts of health care services to large employers.

He said CVS is rethinking almost every part of its daily activities including, "who our customers actually are. Are they the patients who are coming in to get their prescriptions, Are our customers actually the doctors? Basically, every bit of business we get (in the pharmacy) is coming from a doctor," he said.

'Share-shift' with doctors
"It seems to me," Brennan continued, "if you could develop better relationships with hospitals and doctors, you could eventually get to where the doctor would say (to patients), 'Hey, we're working with CVS and we think they do a better job. Maybe you should go to CVS.' If we could get that kind of thing in our business -- the so called 'share-shift' -- it's like magic. It's tremendously profitable."

"Health care reform is a lot of things," he said, "but the guts of it is a move toward making physicians and hospitals do more population health management. If you look at what CMS is doing or talk to large insurer analysts all they talk about is how much their business is going to be based on some set of measures of total outcomes."

One thing this means for CVS, he said, is finding new ways to encourage and support higher rates of medication adherence to drive both better health outcomes across a population as well as higher revenues for pharmacies.

He pointed out that the average patient is about 50% likely to be taking chronic disease medications at six months after they were prescribed. "It's a huge target for us," he said.

CVS research models
CVS research models have concluded that the annual expected health care spending for a population of a hundred thousand Medicare lives is $1.1 billion. But if all those people could be induced to take their medications and other care gaps related to those medications could be eliminated, the program could save $270 million of that $1.1 billion, Brennan said.

This savings would occur because the overall population would be healthier and require fewer health care services.

The "gaps" he mentioned refers to the statistic that 50% of physicians don't follow evidence-based rules, leaving their patients with some sort of gap in care.

He said CVS's goal is to focus on both medication adherence and helping to "fill those care gaps." He said the company is about to "start working with doctors and hospitals on those things."

~ ~ ~

Hoag Levins is journalist and Managing Editor of Digital Publications at the University of Pennsylvania's Leonard Davis Institute of Health Economics (LDI).

blog comments powered by Disqus

Share This Page

share icons



The LDI Blog


LDI Twitter

Data Briefs

LDI/RWJF Joint Reports

Main LDI Site

Health Economics Center


Business News Journal

~ ~ ~


~ ~ ~