Friday, 7 February 2014

Friday What-if: Why CVS Is Quitting Tobacco and the UK/EU implications

CVS Caremark Corp is a $123bn American retailer and health care company that has announced it will stop selling tobacco in October 2014, and focus on healthcare provision.

Respondents to Andrew Sullivan's blog add some interesting insights:
  • CVS own Caremark RX, a huge pharmacy benefits manager (PBM), managing the prescription drug components of Medicare and other public and private insurance programs
  • Pharmacy chains have been providing the care that more traditional medical practices cannot, with CVS clinics rising from 800 to 1,500 by 2015...
  • CVS has between 30 and 40 partnerships with healthcare systems across the US
  • CVS shares the retail-clinic space with Walgreens, Target and Walmart, and the CVS tobacco move could cause these three players to make similar moves re. tobacco, alcohol and even shotguns..
  • Junk food and drinks have to come under the same spotlight as the healthcare market expands...
  • The $2bn lost in tobacco sales will need replacing...
So, apart from some fundamental changes in US retailing, the key issue for UK/EU NAMs has to be the impact of McKesson and Walgreens expansion into Europe on CVS.

What-if CVS decide to copy the McKesson move and acquire some healthcare wholesalers, say Phoenix for starters?

To give you some idea of the scale of the issue and the money involved, some 2012 sales figures:

CVS Caremark                    €90.5bn
McKesson-Celesio              €115.3bn
Alliance Boots-Walgreens    €80.7bn
A.S. Watson                       €14.2bn

Apart from pushing Alliance Boots-Walgreens down into third place, with the right acquisitions, CVS could even take the No.1 slot...

Watch this space... 

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