CVS Health takes over Target's in-store pharmacies and clinics in a $1.9-billion deal

Chain drug stores have been routinely swallowing up small chains or independents, and now CVS Health has taken a big gulp with the in-store pharmacies of Target, the food and retailing giant. Pharmacies will be rebranded as CVS/pharmacy, and the clinics as MinuteClinic. The companies have also agreed that CVS will open 20 additional clinics within three years at Target stores, and that a new retailing format, Target Express, will have 5-10 locations also including a CVS pharmacy. On its own, CVS has a goal of operating 1,500 MinuteClinics by 2017 (it has about 1,000 now). Not mentioned in any of the commentary about the deal was whether existing CVS pharmacies next to existing Target stores would be affected; meanwhile, CVS has committed to offering positions to the 14,000 Target employees affected by the acquisition.

Aside from the usual dynamics of chain drug stores getting bigger by acquiring competitors, the CVS-Target deal is expected to broaden CVS’ move into healthcare, since its increased locations could help its pharmacy benefit-management (PBM) business. With the ambitious goal for new clinics, CVS is also strengthening its position against healthcare systems that have been opening walk-in clinics in many cities.

"When we introduced the new name for our company, CVS Health, we began a new era of growth with a broader health care focus and an appreciation of the rise of health care consumerism with consumer choice and accountability growing,” said Larry Merlo, CVS CEO, in a statement. “This relationship with Target will provide consumers with expanded options and access to our unique health care services that lead to better health outcomes and lower overall health care costs."

Adam Fein, president of Pembroke Consulting (and a Pharmaceutical Commerce Editorial Board member) runs down the implications for drug distribution on his blog: McKesson, which has been a primary supplier of branded drugs to Target, will probably lose the chance to provide generic sourcing, with the CVS/Cardinal Health Red Oak venture for generic sourcing taking over (and could lose the branded business to Cardinal as well); Diplomat Pharmacy, which provides outsourced specialty-pharmacy services to Target pharmacies, will likely lose out to CVS’ specialty services.