CVS Health, the nation’s second largest pharmacy benefits manager and pharmacy health provider, is buying Target’s pharmacy and clinic businesses for $1.9 billion, taking over 1,600 pharmacies in 47 states. The company will rebrand them as “CVS/pharmacy” and operate them in a store-within-a-store model.
Target’s nearly 80 walk-in clinic locations will be rebranded as CVS MinuteClinics, and CVS Health will open as many as 20 new clinics in Target stores within three years as part of the company’s goal to have 1,500 by 2017.
The deal comes as Target reels from the costs of its 2013 data breach and an unsuccessful expansion into Canada, which ended with 133 stores that closed this spring. The company embarked on a restructuring that brought the elimination of 1,700 jobs, a freeze on hiring for 1,400 positions and, now, a reevaluation of its small but significant pharmacy and walk-in clinic network.
For CVS, the deal is another piece of its expansion in the pharmacy business and its growing retail primary care ambitions. MinuteClinic, which CVS acquired in 2006, opened the country’s first retail walk-in clinic not far from Target’s headquarters in greater Minneapolis in 2000, back when it was called QuickMedx.
“This strategic relationship with Target supports the highly complementary customer base, brand and culture we share,” said Larry Merlo, CVS Health President and CEO. “When we introduced the new name for our company, CVS Health, we began a new era of growth with a broader healthcare focus and an appreciation of the rise of healthcare consumerism with consumer choice and accountability growing.”
“By partnering with CVS Health, we will offer our guests industry leading health care services, and at the same time, sharpen our focus on elevating the way we deliver wellness products and experiences to our guests,” said Brian Cornell, Target Chairman and CEO.
The deal could extend the reach of CVS’s clinic footprint as well as its pharmacy and medical management services, which include medication counseling and adherence and an emphasis on low-cost generic drugs.
CVS Health and Target said they also plan to develop five to 10 small stores that will be branded as TargetExpress and include a CVS/pharmacy. This “strategic relationship also unlocks future joint development opportunities,” the companies said.
“We operate in a rapidly changing healthcare and regulatory environment,” said Merlo. “This requires companies like CVS Health to continually innovate, providing additional points of access, lowering costs and improving quality for both consumers and payors.”