CVS to purchase Target Pharmacy & Clinic operations

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CVS to purchase Target Pharmacy & Clinic operations

Post by submariner » June 15th, 2015, 6:47 am

http://money.cnn.com/2015/06/15/news/co ... index.html
This means that CVS is taking over, and rebranding in its own image, the 1,660 pharmacies that Target operates within its stores in 47 states.
CVS is also taking over Target's 80 clinics and rebranding them as MinuteClinic.

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Re: CVS to purchase Target Pharmacy & Clinic operations

Post by J-Man » June 15th, 2015, 1:18 pm

So does that mean they'll feature CVS store-branded products alongside (or in lieu of) Target-branded products? Or is this just a "behind-the-scenes" type thing where there won't be any indication that CVS is running the operation and it will look like does now?

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Re: CVS to purchase Target Pharmacy & Clinic operations

Post by wnetmacman » June 15th, 2015, 5:44 pm

J-Man wrote:So does that mean they'll feature CVS store-branded products alongside (or in lieu of) Target-branded products? Or is this just a "behind-the-scenes" type thing where there won't be any indication that CVS is running the operation and it will look like does now?
The indications thus far (though not many details have been released) is that it will be a CVS 'store-within-a-store'. How detailed that will be, and whether Target will give up on the Up&Up line of pharmacy items has not been announced.

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Re: CVS to purchase Target Pharmacy & Clinic operations

Post by Alpha8472 » June 15th, 2015, 8:39 pm

I work in a pharmacy and here is the inside story. The reality is that Target has been losing money on their pharmacies. Target simply does not know how to run a pharmacy and make it profitable. Even Walmart is having issues with losing money on their pharmacies. The issue is the acceptance of Medicaid. Medicaid is prescription insurance for low income people. The government pays for the medicines of low income people who are enrolled in Medicaid. However, the government gives so little money to pay for medicines, that often the pharmacies lose money on prescriptions. For example, CVS and Walgreens stopped accepting Blue Cross's version of Medicaid for the state of California. This is called Blue-Cross Medi-Cal. CVS and Walgreens were losing too much money on that type of insurance. Target and Walmart still take this insurance and lose money on it. The only way to get a profit off of these pharmacy customers is if those pharmacy customers buy products in the rest of the store to make up for the loss in the pharmacy.

I would suspect that CVS is only taking over the prescription pharmacy part of the store. The over the counter products on the shelves outside of the prescription pharmacy will remain Target products. Those Target brand products are where the profits are made. Target would never want to give up on those profits. CVS would love to sell their products in Target, but Target would never allow it. CVS would take out a chunk of Target's profits and that is something Target will not allow. Update: a news article confirms that Target will keep their over the counter products branded as Target Up and Up products. Cornell says that having CVS customers flock to Target stores will bring in more traffic. That is correct, however, CVS would lose traffic once people realize that Target sells stuff much cheaper than CVS. CVS is like a convenience store, with very expensive products that are practically rip off prices. This could backfire on CVS.

CVS will obviously whip those Target pharmacies back to profitability. To do this they will stop accepting Blue Cross/Medi-Cal and any other county or city Medicaid plan that is not profitable. They should focus on only taking profitable private insurance plans and tell those low income customers to find another pharmacy. Walgreens and CVS have been telling Blue Cross/Medi-Cal customers that they don't take their insurance for several years now.

I have inside information and even Walmart has serious issues with profitability in their pharmacies. Walmart on the other hand could get back to profit by refusing to take Blue Cross Medi-Cal insurance. However, where else would those low income people go? Those low income shoppers do indeed shop at Walmart and buy tons of merchandise which brings in profits to Walmart. You lose money on the prescriptions, but you make up for it by sales in the rest of the store.

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Re: CVS to purchase Target Pharmacy & Clinic operations

Post by submariner » June 15th, 2015, 9:26 pm

The question I have, is will CVS adopt Target's far superior pill bottles? They're already red, and everyone I've talked to (at least in my family) really likes the bottles.

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Re: CVS to purchase Target Pharmacy & Clinic operations

Post by Alpha8472 » June 15th, 2015, 10:03 pm

The sad fact is that Target patented those bottles. CVS uses old fashioned pill bottles. Unless Target sells the rights to the pill bottle design, CVS will not be able to use those Target pill bottles. I think Target might be willing to sell the rights. However, CVS is a stingy company and knows that their CVS pill bottles are cheaper. CVS gets their pill bottles from one manufacturer (McKesson) at a cheap price. Also CVS's labels for prescription bottles will not fit on those Target bottles. CVS uses an entirely different prescription label software system and printers than Target. CVS would never invest so much money in a chain-wide change.

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Re: CVS to purchase Target Pharmacy & Clinic operations

Post by Super S » June 16th, 2015, 7:45 am

I worked at Target for a couple years in the early 1990s. They were late in developing a pharmacy program. A handful of stores started adding pharmacies by the time I left Target, but most Target stores at that time did not have a pharmacy. Even Kmart was more established in pharmacy at that time. Pharmacies did not become common at Target until the late 90s-early 2000s. Sure, they have innovations like the pill bottles, but some people do not have high regard for their pharmacies due to the relatively late entry into the field. It comes as no surprise that they are struggling. CVS at least has an established name in the pharmacy business.

It comes at an interesting time also as CVS has only recently (within the past year) appeared in the Northwest, while Target has an established store presence. This could work in Target's favor, but could make a hard case for CVS to build any more of their own stores. It sounds a lot like what happened when Albertsons started the Sav-On co-branding...they did open a few standalone Sav-On stores in the Boise market which didn't last very long, while keeping the branding on the existing Albertsons stores over a wider area.

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Re: CVS to purchase Target Pharmacy & Clinic operations

Post by storewanderer » June 16th, 2015, 11:13 pm

I feel like Target must be having some real problems.

Even Kmart still operates pharmacies. Pharmacy was also always a strong area for Shopko. I wonder why Target was unable to profit from pharmacy, but low volume and struggling retailers like Kmart and Shopko keep them going.

I have heard a number of grocers, especially smaller regional chains in that +/- 100 pharmacies range, are really struggling with pharmacy profitability now also due to the reimbursement issues described by Alpha. However it is difficult because in some cases low volume stores are doing decent prescription counts and if you remove those customers the store becomes even lower volume and may no longer be viable. Sort of like you trade the losses in pharmacy for losses elsewhere in the store due to having fewer customers coming in.

CVS used to have pharmacies inside the Woodland and Roseville Nugget Markets (Nugget controlled the OTC areas) but closed both of those and moved the files to nearby stores.

This may be a good future model for CVS because CVS is not very good at front end.

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Re: CVS to purchase Target Pharmacy & Clinic operations

Post by veteran+ » June 17th, 2015, 7:34 am

Unfortunate that Target is giving up, because I was very pleased with their service.

CVS? NOT!

Oh well, just another example of consolidation and fewer choices for the consumer and many times the employee as well.

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Re: CVS to purchase Target Pharmacy & Clinic operations

Post by J-Man » June 17th, 2015, 2:28 pm

There are places where there is a CVS and a Target in the same shopping center, and others where they are quite close to one another. I wonder how this will work -- having two CVS pharmacies within walking distance? It's not like they're Starbucks or McDonald's.

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