Two of the country’s giant pharmacy chains made waves over the weekend by announcing major strategy shifts likely to affect millions of consumers. CVS Health, which operates 9,700 CVS Pharmacies and 1,100 MinuteClinic locations, has announced its intent to acquire heathcare giant Aetna in a $69 billion cash and stock deal that CVS CEO Larry Merlo said will “remake the consumer health care experience.”
In related news, on Sunday Walgreens kicked off a major brand repositioning intended to move the company “beyond the counter” and establish it as a wellness-oriented brand centered on personalized care. Walgreens is the country’s No. 2 pharmacy chain by size, with 8,100 stores in all 50 states, in addition to 400 Healthcare Clinics inside stores.
Both moves come amid widespread rumors that Amazon is contemplating an expansion into the drug business, the pharmacy business, or possibly both.
Assuming the CVS/Aetna merger goes though—and it has yet to receive regulatory approval—the most visible changes consumers are likely to see are inside the stores, both in terms of offerings and prices. CVS has pledged to remake itself into “a community-based health hub dedicated to connecting the pathways needed to improve health.” In other words, CVS locations seem set to become one-stop shops for many health-related goods and services.
While some industry watchers have suggested that the merger might benefit consumers—say, by offering one-stop healthcare to the nearly 47 million Americans currently insured by Aetna—others say that the proposed deal is less about serving consumers and more about building revenues and market share in a segment in which change is long overdue.
“This market is going through a reinvention [and CVS] has to reinvent themselves to stay relevant,” said business-development and branding authority Dean Crutchfield, who believes that CVS sees greener pastures in pharmaceutical benefits than in traditional retail.
Indeed, CVS already took a step in that direction a decade ago when it purchased Caremark, an acquisition that has since made it into the largest pharmacy-benefits manager, or PBM, in America. While there has been some talk that CVS could use its bigger size to negotiate better drug prices for consumers, critics contend that PBMs’ profits have historically been tied to increasing drug prices, not lowering them.
In any case, Crutchfield believes, “consumers are not really high on the agenda” in the proposed merger. “We’re having some sops thrown our way, but this is about market share and jockeying for position.”
Veteran brand consultant Allen Adamson also doesn’t think that the proposed CVS/Aetna merger will result in much of a benefit for consumers. “Bigger does not mean better in this instance—bigger means slower and more bureaucracy,” he said. “An average insurance company merging with an average retailer will not make for a delightful experience, and two weak brands getting together does not make a strong one.”
One thing is clear, however: The press release promises of a “human touch” and a pledge to “create a health care platform built around individuals” is very much in keeping with the existing movement of pharmacy chains in the service-provider direction, a move that began a few years ago when they started getting into the clinic business.
What’s more, in pledging to give customers the warm fuzzies, CVS isn’t alone.
The No. 2 brand is also switching it up
For its part, Walgreens—in a marketing push that began on Sunday—has announced a major rebranding initiative that will position the company as a wellness-centered brand predicated on the sort of personalized service that Americans were accustomed to generations ago, when the local pharmacist knew you by name and dispensed the sort of advice that’s lacking from the faceless, publicly traded pharmacy chains of today.
To this end, Walgreens has modified its logo to include the slogan “Trusted Since 1901,” and will, in the coming months, roll out “new in-store offerings, products and services” designed to “fulfill [customers’] health and wellness needs.”