CVS Health Corp. CEO Larry Melo recently announced that the company is investing billions into the purchase of a nursing home pharmacy operator in an attempt to transform into a dominant healthcare player for senior needs. CVS purchased the company Omnicare, Inc. in its bid to outgrow CVS’ drugstore chain persona into something more all-encompassing for healthcare needs and focus more on the growing population of aging seniors in this country.
Recent Changes to CVS
This is not the first major change that CVS has made to its healthcare focus in recent years. In 2011, the company announced that it will no longer be selling cigarettes in its mission to improve its consumers’ health. It also changed its name from CVS Health to CVS Caremark and aggressively expanded the number of in-store health clinics. By 2017, CVS aims to have another 600 in-store health clinics for consumers and in 2013 the company purchased a drug-infusion company to expand its healthcare competencies.
Purchase of Omnicare, Inc.
The purchase of Omnicare, Inc. cost CVS $12.7 billion including debt. It is by far one of the largest and most aggressive moves that CVS has made into becoming a major healthcare provider. The company expects that the purchase of Omnicare will add adjusted earnings of twenty cents per share to its stock in the next year. The only other deal that is comparable to the purchase of Omnicare was CVS’ purchase of Caremark Rx, Inc. in 2007 for $21.7 billion.
The purpose of these major changes is to “move away from being solely a pharmacy and PBM to becoming more of a vertical integrator of health care,” focusing primarily on an aging population with greater care needs. Omnicare provides medications and helps nursing home facilities manage their residents’ medications. CVS hopes to use this platform to move its care services towards more long-term care needs and assisted-living operations.
Growth of CVS Healthcare
The pharmacy unit for CVS is by far the company’s largest driver of growth, with revenues increasing by 18.2% in that sector last year. The demand for pharmacy and medications continues to grow as more patients and medical professionals look to manage the costs of medications in a time of soaring drug prices. With the purchase of Omnicare and other vertical companies in the drug supply chain, CVS is poised to provide quality medications to seniors and other patients at a lower price.
Currently, CVS is the nation’s largest provider of prescription drugs and the second largest pharmacy benefits manager in the United States. The company handles health plans for insurers and employers alike. In total, CVS operates 7,700 retail pharmacies, 900 walk-in clinics, and manages the pharmacy benefits of over 65 million people across the country. With the purchase of Omnicare, CVS hopes to increase the number of consumers cared for by millions as more seniors are in need of long-term care and medication.