CVS Health is set to acquire big box retailer Target Corp.'s pharmacy business for $1.9 billion in a move expected to further position the retail pharmacy chain into the role of healthcare provider.
Monday's announcement means the Woonsocket, R.I.-based drugstore chain will take over more than 1,660 pharmacies in Target stores in 47 states and operate them as a store within a store, with pharmacies carrying the CVS brand. CVS pharmacies will be included in all new Target stores offering pharmacy services, according to the announcement.
CVS also will take over as many as 80 of Target's clinics and rebrand them as CVS Minute Clinics, with plans to add 20 new clinics in Target stores over the next three years. The move is part of CVS's plan to operate as many as 1,500 clinics by 2017.
“This strategic relationship with Target supports the highly complementary customer base, brand and culture we share,” said Larry Merlo, CVS Health President and CEO in a statement. “This relationship with Target will provide consumers with expanded options and access to our unique health care services that lead to better health outcomes and lower overall health care costs.”
Drugstores, grocers and big retailers like Target and Wal-Mart all have been pushing into each other's turf for several years now, blurring traditional retail boundaries, as they try to attract customers who want to make fewer stops when they go shopping.
The number of stores the average consumer visits over a month has dropped 15 percent over the last five years, according to market researcher NPD Group.
"In other words, they're not running from place to place to place like they used to," said Marshal Cohen, NPD's chief retail industry analyst. "It doesn't mean I am shopping less, it just means I am going to less stores."
In response, retailers have been adding clinics and pharmacies. Drugstores, in turn, have started stocking groceries.
CVS is currently the nation's second largest drugstore chain with more than 7,800 stores and 900 walk-in clinics. The deal is the latest in a growing trend of consolidation by retail pharmacy managers over the last several years.
All these businesses are chasing health care dollars as they watch Baby Boomers grow older and start using the health care system more and as the number of insured people climbs due to the health care overhaul.
In May, CVS announced it was acquiring nursing-home pharmacy benefits manager Omnicare for $12.7 billion, which followed rival Walgreen's acquisition in January of Swiss pharmacy retailer Alliance Boots.
While the increase in CVS' size raises the possibility that it will gain further leverage in negotiating with pharmaceutical firms over drug prices, others are concerned such deals put smaller, independent pharmacies, some of which provided pharmacy services to underserved areas, at risk of being unable to compete.
“Further consolidation in the retail setting means pharmacy services are increasingly available only from a fewer number of larger entities,” said Douglas Hoey, CEO of the National Community Pharmacists Association, in a statement. “Patients in underserved rural and inner-city areas rely on access to independent community pharmacies for prescription medication and counseling. For these, and some other patients, national pharmacy chains are not a practical option.”
The deal is expected to be completed by the end of this year, according to CVS.
CVS said it would offer the 14,000 Target employees currently working within the stores' clinics and pharmacies positions at the new CVS-run operations.
The Associated Press contributed to this report.