Cvs (NYSE:CVS)
Historical Stock Chart
3 Anos : February 2009 para February 2012
CVS Caremark Corp.'s (CVS) pharmacy benefit management business isn't broken, and the company is correcting problems that recently caused it to lose existing and potential accounts, Chief Executive Thomas Ryan said Tuesday.
"This is not a structural issue, these are issues that can be fixed," Ryan said at a Lazard Capital Markets investor conference.
CVS Caremark's PBM operation both lost and won billions of dollars in business over the past two years, Ryan said, acknowledging marketing and "isolated" service problems while defending the company structure that pairs a major drugstore chain with a PBM.
Some analysts renewed questions about the plausibility of the CVS Caremark business model--forged in a 2007 merger--after the company earlier this month disclosed greater-than-expected client losses totaling a net $4.8 billion for 2010. That news sent the stock down 20%, and the company conceded that problems with its marketing message had contributed to its sales problem.
"This notion that the model doesn't work is baloney, that's not the issue," Ryan said, adding that the retail side of the business is doing well. There is "a lot going well in the total enterprise."
The PBM, he said, offers strong clinical programs to help clients control health costs--something that sales people now will emphasize in meetings with potential clients. CVS executives acknowledge that their marketing message this year missed the mark with some potential clients by focusing too heavily on CVS stores and not enough on the pharmacy-benefit offerings.
The company, aiming to fix the problem, last week dispatched several senior executives to meet with the consultants who guide employers in choosing a drug-benefit vendor and preview their updated client presentation.
One of those consultants, David Dross, national managed pharmacy practice leader at Marsh & McLennan Cos. (MMC) consulting business Mercer, said Tuesday that while the new Caremark presentation was "a step in the right direction," it was not there yet, as the message was not crisp enough. Mercer consultants offered that feedback and told Caremark executives that the business also needs to address some service issues to both retain and attract new clients, he said.
Caremark executives, Dross said, "need to focus on doing the basic blocking and tackling around client management as well as crystallize a more succinct marketing message," so that they can sell prospective customers on top-level service and access to an innovative model that fuses retail and PBM operations.
In this year's sales cycle for 2010, the consultant said, "their pricing and so forth was competitive, but they weren't as persuasive as other firms in really outlining the specific value [proposition] of the CVS Caremark" operation.
As far as account management, Caremark staff seemed to be stretched too thin, he said. That's a message that the company seems to have heard and says it is fixing.
Ryan, at the investor conference, said that while Caremark doesn't have an overall service problem, given a 97% favorable rating from clients, there have been isolated instances where perhaps account management staff was too stretched.
While the 2010 selling season has fallen short, Ryan said there's about $1.5 billion in business remaining that's up for renewal. "We're fighting the fight," he said. "We feel directionally pretty good about the rest of the season."
A good portion of the business that left Caremark for 2010 related to a few large accounts, including Medicare prescription-drug clients, Ryan said, explaining that not all is wrong in a business with more than 3,000 customers.
Pricing is not the major issue, he said, and "there's not going to be any nuclear blast on pricing here."
Ryan again dismissed the claims from critics that CVS acquired Caremark to drive more business into its stores. CVS thought the cost synergies would be enormous and the combination would make it easier for people using the Caremark PBM, he said.
-By Dinah Wisenberg Brin, Dow Jones Newswires, 215-656-8285; dinah.brin@dowjones.com