There Goes the Neighborhood

I was in New York last week and found the debate between local Democrat party leaders about Amazon’s new headquarters fascinating.  Some welcome the move into the Queens neighborhood across from Manhattan and the 25,000 high paying jobs it will bring, while others have pronounced it as all sorts of evil for the displacement gentrification will bring to current residents.

When somebody big moves into the neighborhood, things change.  Whether it is good or bad all depends on where your bread is buttered.  Personally, mine is buttered all over.  Don’t judge me.

Speaking of big and loud folks moving in, CVS recently opened three new Health HUB concept stores in the Houston area.  These provide a glimpse into how the 9,600-store retail chain is thinking about its increasing focus on healthcare, starting with the bright red ‘Welcome to the Health HUB’ branding on the front door.

Slow moving retail items have been shuttered to devote more square footage to health and wellness products.  More space means the Minute Clinics can expand services to include phlebotomy, diabetic screening and even sleep apnea assessments.   Pharmacists are expanding their role in patient education; registered dieticians provide one-on-one support and teach onsite classes.

Speaking of which, the space is configured so that areas can be blocked off for yoga classes.  Don’t have a mat?  Don’t worry, they are right over there by the durable medical equipment section.

If this sounds like a lot and maybe a tad confusing, never fear.  The ‘care concierge’ is there to help you get everything you need from your visit to the doctor/pharmacy/health club/lab/grocery store/tire and lube center.  Yep, they are even taking on the Walmart Greeter.

Throw in a separate announcement about CVS’s video visit service ($59 via your smart phone, all major credit cards accepted), which will soon be covered by CVS’s new insurance company once the Aetna acquisition closes, and you start to see what is being cooked up in the board room there in Woonsocket, Rhode Island.

This all begs the question, ‘Who is CVS NOT competing with?’

We could detail out of all the segments of healthcare they are looking to consume, but I think the more interesting angle on all of this is how they are positioning themselves against the aforementioned wheat thrasher from Seattle, another outsider with its sights set on the $3.5 trillion healthcare market. 

Do you really think taking yoga class market share from the local Y matters a whit to the $69 billion-dollar company that CVS will be when the Aetna deal closes?  Please. 

But what does matter are all of those smiling human beings located in the store, right there on your way to work.  This is the opposite of the ubiquitous brown boxes dropped off by the UPS guy.

Oh, and it is pretty different from that big imposing thing called a ‘hospital’ as well.

Yes kids, the neighborhood is changing.

Toomer’s Drugs

Toomer’s Drugs sits on the corner of College Street and Magnolia Avenue. Old-growth southern oak trees provide afternoon shade to a visitor sitting on the bench outside the store enjoying a glass of Toomer’s world famous lemonade, one of only two things for sale there, the other being every conceivable piece of paraphernalia emblazoned with the blue and orange University of Auburn logo.

What you can’t get at Toomer’s is your prescription filled.

Founded by Shel Toomer, business slowed after 100 years and the shop closed up. A local couple bought the place and reopened it to keep the tradition alive, but who needed to sell medicines?  Lemonade and souvenirs made more sense.

I’d say that sounds like CVS, but they actually do still fill a lot of prescriptions.  However, it seems they want to sell us a lot more these days.

CVS has been busy, most significantly with the news that it is looking to buy Aetna.  The company said it doesn’t comment on rumors, but The Wall Street Journal is not The Onion. Its sources said talks have been going on for a couple of months.

Which is interesting, because just 12 days ago CVS announced its new five year partnership with IngenioRX, the new pharmacy benefits manager (PBM) formed by Anthem.  Remember, Anthem sued Express Scripts, their previous PBM partner, for $15 billion in damages.  Now they have their own PBM, which has a long term strategic relationship with CVS.  Who is in talks to buy Aetna.

Now, the rivalry between Aetna and Anthem is not as fierce as the Auburn Tigers and the Crimson Tide (Trump v North Korea is not as intense as things will be on when Alabama comes to town in November), but let’s just say that buying Aetna while partnering with Anthem would be more tricky.  That complexity and the likely objections the FTC would raise on this deal suggest this is not likely.  But it prompts us to take a look at CVS.

With almost 5 million people walking into one of their 9,600 pharmacies every day; with over 1,100 Minute Clinics in those pharmacies; with it OmniCare division being the country’s largest long term care pharmacy distributor; with its 80 million PBM members, CVS is already a major force in healthcare.  Partner with Anthem? Buy Aetna?  That is some serious lemonade.

Here are a few comments from CEO Larry Merlo in the announcement of the Anthem PBM partnership:

‘We believe that this agreement further validates the important role that CVS Health’s integrated and innovative pharmacy care model plays in today’s health care system…we look forward to providing services to help ensure coordinated, holistic care for their PBM members…we truly are the front door of health care…our pharmacists and nurse practitioners are able to engage in face-to-face personalized counseling and clinically-effective interventions that will enable us to help improve health outcomes and lower overall health care costs for Anthem and its members.’

Drug store or your competitor?