Biotech Values

[DewDiligence]

Healthcare At The Drugstore

[Walk-in medical clinics staffed by nurse practitioners and PA’s are not novel—in Massachusetts at least, they’ve been around for two decades. What’s novel is the idea of stationing thousands of these clinics inside CVS drugstores.]

http://www.boston.com/business/globe

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CVS planning to buy operator of in-store clinics

By Jenn Abelson
July 14, 2006

CVS Corp. wants to dispense medical care along with medicine.

The drug store chain said yesterday that its planned takeover of MinuteClinic, an operator of in-store clinics, will allow it to bring convenient, affordable healthcare to stores in New England within the next two years.

The acquisition of MinuteClinic, which runs 83 clinics in 10 states -- including 66 in CVS stores -- will make the Woonsocket, R.I., pharmacy chain the leading provider of in-store medical clinics. Financial terms of the deal, which is expected to close this summer, were not disclosed.

“Once the clinics open in stores, the new traffic is phenomenal," David Rickard , CVS chief financial officer, said yesterday. “We view the CVS brand as a healthcare brand, and these clinics offer real value to consumers."

MinuteClinics are typically 100-square-foot offices located in the back of CVS stores, staffed by certified nurse practitioners and physician assistants who offer treatments for common illnesses, prescribe medications, and administer vaccinations. They accept most major health plans and the average charge without insurance coverage is about $50. At CVS MinuteClinics it typically takes under 15 minutes to receive care, Rickard said, and patients can have prescriptions filled at on-site pharmacies.

“American healthcare is uniquely inaccessible and expensive for people with minor ailments, particularly if they have no insurance," said Mark Husson , an HSBC Securities analyst. “The in-store clinics provide basic medical care that's available to everyone. This could be an enormous business for CVS."

The planned acquisition comes as other companies, including Wal-Mart Stores Inc. and CVS rival Walgreens [sic] Co., are also moving to provide lower-cost and convenient medical care through in-store clinics.

Tiffani Bruce , a Walgreens spokeswoman, said the company next week is opening 10 in-store clinics in the Kansas City metro area -- Walgreens's first -- and another nine in the St. Louis market this summer. Demand for such medical care is expected to grow as insurance companies and employers offer more plans that increase patients' out-of-pocket expenses. But some doctors have challenged the quality of care that can be delivered in stores, especially when physicians aren't familiar with a patient's medical and pharmaceutical history.

MinuteClinic says that its services are intended to supplement, not replace, a primary care physician and that it provides customers with the names of primary care practices accepting new patients.

“CVS recognizes that MinuteClinic can build on our strong collaborative relationships with the physician community while continuing to innovate and operate independently in a variety of settings," Glen D. Nelson , MinuteClinic's chairman, said in a statement. “At the same time, the transaction will allow both parties to make contributions to develop a breadth of offerings to improve the quality and access to healthcare for those we service."

CVS said it plans to locate medical clinics in one-quarter to one-third of its 6,100 stores and plans to roll them out as quickly as possible. Rickard described Boston as a “great market" for the clinics, saying they work best in places where people are educated enough to understand the in-store concept.

MinuteClinic also operates clinics in other retail outlets, including Target Corp. stores. CVS said it would not shut down any clinics, even if they are in stores that compete with CVS for business. MinuteClinic's headquarters will remain in Minneapolis and the existing management will stay in place.

“We want MinuteClinic to thrive as much as it can. If that means being in a competitor's store, then fine," Rickard said.

Joseph Agnese , an analyst with Standard and Poor's, said CVS's existing MinuteClinic outlets have performed better than expected. The clinics differentiate CVS stores from other pharmacies, he said, and their customers generate new business by filling prescriptions and buying merchandise during visits for medical care.

But Regina Herzlinger, a professor of business administration at Harvard Business School, said the MinuteClinic purchase isn't a guaranteed success for CVS, even if it appears to make strategic sense.

“It's a risky venture. CVS runs a retail product store -- selling everything from combs to prescriptions. MinuteClinic is a service business," Herzlinger said. “And it's very hard to go from one to the other."
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