The top leaders of CVS Health Corp. aren’t saying COVID-19 is no longer materially affecting their business. But they made it clear Feb. 9 they are starting to look beyond the pandemic – and expect the Rhode Island-based company’s digital muscle to power much of the engagement needed to ensure long-term success.
The pandemic brought to CVS masses of new customers looking for vaccines and tests: The company administered 59 million shots and 32 million tests in 2021 (but those numbers are forecast to drop off significantly this year). Many of those consumers not surprisingly stuck around for other products and services, helping drive same-store sales up more than 13 percent, with so-called front-store sales not directly related to the company’s pharmacies climbing nearly 19 percent. The extra traffic also lifted CVS’ pharmacy script market share (as reported by IQVIA) more than half a percentage point to 26.7 percent.
Now, after that big tactical lift, comes the more strategic follow-up.
Speaking to analysts and investors after reporting CVS’ fourth-quarter results – which showed a profit of nearly $1.3 billion, up from $975 million in late 2020, on sales of $76.6 billion – President and CEO Karen Lynch and her team said, among other things, that they are shifting their focus to a post-testing, post-vaccine world in which CVS can retain many of the consumers new to its stores, software applications and health plan members. Chief Customer Officer Michelle Peluso said doing that starts with a sharp focus on customer experience that builds on the satisfaction benefits from the company’s vaccination and testing work. The hiring of about 45,000 clinical and retail team members via a late-September virtual career event will give Peluso’s team a chance to train new talent to do that.
From there, CVS wants to bring newer customers onto its digital platforms and into its loyalty programs. That helps the company and customers connect the various parts of CVS’ business such as prescriptions and more general health and wellness products. Lynch noted that 40 million people now have digital relationships with CVS and that that number has risen by about 4 million since the summer. Similarly, four out of five patients are using a digitized check-in process to eliminate paperwork before they use CVS’ HealthHub or MinuteClinic services and the company’s premium CarePass prescription delivery program – which Peluso said is another driver of higher engagement – has grown 40 percent in the past year.
There’s more to come, both in the short term and beyond. Next week, Peluso said, CVS will roll out an online service that helps consumers find the nearest CVS store with free COVID test kits.
Digital services also are a key component of CVS’ multibillion-dollar push into primary care services, which Lynch and her team late last year said will really start to gather steam in the middle of this decade via both organic growth and acquisitions – a strategy peer Walgreens Boots Alliance also is pursuing.
“Digital is a part of the strategy; it's not necessarily the driver,” Lynch said. “I think it's important when you think about the connectivity of care, the continuity of care, [and] the seamless experience, you have to have those digital connections. So that will be part of our overall strategy. And we will continue to look at what we can do internally versus what opportunities there are externally.”
The expected drop in COVID business this year also means CVS executives are paying attention to wringing some efficiencies from the operation they’ve built to manage pandemic-related care. Chief Pharmacy Officer Prem Shah said that CVS’ customer-focused digital priorities also are helping eliminate duplicative work in its pharmacies but that there are more savings to book.
“We’re definitely continuing to look at our back of the store and creating what I'd say is a digital-first experience for consumers but also creating efficiencies across stores when you look at our pharmacy assets and how we can leverage those efficiencies,” Shah said. “So [we’re] absolutely looking at that. There's more to come.”
Shares of CVS (Ticker: CVS) were down more than 5 percent to about $105 in afternoon trading Feb. 9 as investors focused on the fact that Lynch and her team left intact the initial 2022 earnings guidance they provided late last year. The shares are, however, still up nearly 30 percent over the past six months.