Growth at Minute Clinic more than clinic counts

Drug Store News,  Nov 12, 2007  

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CVS subsidiary MinuteClinic, which currently operates more than 300 retail clinics, is undoubtedly an important part of CVS' business that will further set it apart from the competition, especially when taking into account CVS' PBM business.

"We have five times the number of clinics than our next-largest competitor, and I believe we have a significant competitive advantage in this space for two reasons: We are the market leader and we are first to market, and there's a significant opportunity to use MinuteClinic with our Caremark clients," said Tom Ryan, president and chief executive officer of CVS Caremark, in the company's third-quarter conference call with analysts.

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Ryan said the company is growing its MinuteClinic business "as fast as we can." MinuteClinic, which launched the first retail healthcare center in the United States in 2000, started the year with more than 140 clinics in about 18 states. Today, the number of clinics stands at 350 in 24 states. All but 23 of the locations are within a CVS retail pharmacy. By year-end, the company expects to operate about 450 clinics across 25 states and possibly 750 by the end of 2008.

"CVS believes that the clinics are central to the company's overall strategy by providing more touch points with patients, enhancing the stores' healthcare image and providing convenience and good patient care to consumers," stated Lehman Brothers analyst Meredith Adler in a recent research note.

Lehman added that the cost to roll out MinuteClinic was about $69 million in 2007, leading to dilution of about 3 cents to earnings per share, an amount that is likely to be similar next year if CVS maintains the fast pace of rollout. The clinics should, according to Lehman, provide a slight net benefit in 2009.

However, Ryan sees growth opportunities expanding beyond simply opening additional retail-based clinics. He said that its PBM clients have expressed a great deal of interest in MinuteClinics and, as a result, the company is designing tailored pilot programs to use MinuteClinics to monitor health assessments and screen for illnesses that perhaps would otherwise go untreated.

"We are using MinuteClinic with our PBM offering where we may use the clinic for health assessments for a client or may use the clinic for different screenings for the client. So without getting into all of the details, it is going to perform more than what it does [currently] with just treating everyday illness for the general public."

There's also an opportunity to establish more corporate clinics. In fact, Ryan said the company is looking to put clinics near or in close proximity to a client's corporate facility where the client would get some form of "special attention," but the clinic also would be open to the general public.

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"We are looking at all of the opportunities as we go forward, but [companies] are definitely reaching out for MinuteClinic because, quite simply, it just works," Ryan said.

For those industry members who may be concerned that MinuteClinic has reached a point of saturation, Ryan says not so fast.

"We don't see saturation at all. In fact, we are trying to roll out quicker in markets," he said. "Our biggest challenge is some state regulatory hurdles that are being put in our path, but we are working through those so saturation is the least of our problems." Ryan declined to disclose clinic specifics, such as clinic traffic. "We don't get into specifics on each clinic and what is happening, but there is significant growth. And the longer the clinic is open, and the more exposure it has in the market and the more brand recognition it has in the market, the more business we get. We know that when we dense up the clinics in the market, we have better penetration and better utilization by the consumer."

That is not to say, however, that no challenges exist. Aside from overcoming some state regulatory hurdles, Ryan said, it is important to figure out how to make the most of nurse practitioners' time during the "slow season."

"There's fixed cost with these clinics, and they are great for our brand and great for overall go-to-market strategy around retail and PBMs. The challenge is, which is what we are working on, is the so-called 'slow season' of June, July and August," Ryan said. "We need to make sure that we are using these nurse practitioners in the right way, and that's what our teams are working on now."

When asked by an analyst during the call if the clinics could eventually be used for infusion-type services, Ryan said not at this time as it would be a huge investment and infrastructure, and quite labor-intensive with nurses going to the home.

"We think there is something in between, where we could possibly use some of our assets to do something in the clinics and maybe help the chronic-infused patients," he said.