CVS Health To Purchase Target Pharmacies in $1.9B Deal

On Monday, CVS Health announced it will buy more than 1,660 pharmacies in Target stores located in 47 states for about $1.9 billion, the Los Angeles Times reports.

Under the deal, nearly 80 existing Target clinics will be rebranded as CVS Health MinuteClinics. In addition, CVS Health said it would open 20 branded clinics in new Target stores that plan to offer such services within three years after the deal closes. CVS Health and Target also said they would open five to 10 smaller-format TargetExpress stores containing CVS clinics over a two-year period.

CVS Health said it will finance the deal by taking on debt. The deal is still subject to regulatory approval, and the company did not indicate when the deal would close (Li, Los Angeles Times, 6/15). According to the AP/Chicago Tribune, if approved, the deal would make CVS Health the largest drugstore chain in the U.S., with 9,435 locations (Sachdev, AP/Chicago Tribune, 6/15). According to Modern Healthcare, the acquisition is part of CVS Health's goal to run as many as 1,500 clinics by 2017 (Ross Johnson, Modern Healthcare, 6/15).

Potential Effects

According to CVS Health, the acquisition will result in "significant sales and prescription volumes." Further, both CVS Health and Target said the deal will benefit consumers by allowing the pharmacies to offer lower prices, particularly for generic prescription drugs, because CVS Health's size gives it more leverage to negotiate with suppliers.

CVS Health CEO Larry Merlo said the acquisition "is not simply about a pharmacy retailer operating pharmacies for others," adding that it provides an opportunity "to improve access, improve health outcomes and, at the same time, reduce the overall cost of care."

Target CEO Brian Cornell agreed, saying CVS Health "bring[s] scale, ... cost efficiency" and "expertise that we just could not bring to a space where we are operating as a sub-scale player" (Los Angeles Times, 6/15).

In addition, the deal could bolster CVS Health's pharmacy benefit management arm, called CVS/caremark, through which individuals can choose to have their long-term medications sent to them via mail or to pick them up in store. Adam Fein, president of the management advisory and business research firm Pembroke Consulting, also noted the move could attract more employers to use CVS/caremark as their PBM because employees would have convenient places to pick up their medications (Thomas et al., "DealB%k," New York Times, 6/15).

Reaction

While some say the deal could help to give more people access to lower-priced prescription drugs, others worry that such deals limit consumer choice.

Douglas Hoey, CEO of the National Community Pharmacists Association, said in a statement, "Further consolidation in the retail setting means pharmacy services are increasingly available only from a fewer number of larger entities." He continued, "Patients in underserved rural and inner-city areas rely on access to independent community pharmacies for prescription medication and counseling. For these, and some other patients, national pharmacy chains are not a practical option" (AP/Modern Healthcare, 6/15).