Businessweek

CVS Caremark Corporation operates as an integrated pharmacy health care provider in the United States. The company offers its services through its pharmacy benefit management (PBM), mail order, and specialty pharmacy division, CVS Caremark Pharmacy Services (Caremark); approximately 7,400 CVS/pharmacy retail stores; retail-based health clinic subsidiary, MinuteClinic; and online retail pharmacy, CVS.com. Segments The company’s segments include Pharmacy Services and Retail Pharmacy. Pharmacy Services This segment provides a range of PBM services to the company’s clients consisting primarily of employers, insurance companies, unions, government employee groups, managed care organizations (MCOs), and other sponsors of health benefit plans and individuals throughout the United States. In addition, through its SilverScript Insurance Company (SilverScript) and Pennsylvania Life Insurance Company (Pennsylvania Life) subsidiaries, the company provides drug benefits to eligible beneficiaries under the Federal Government’s Medicare program under Part D of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Part D). This segment operates under the CVS Caremark Pharmacy Services, Caremark, CVS Caremark, CarePlus CVS/pharmacy, RxAmerica, and Accordant names. Business Strategy: The company’s business strategy centers on providing innovative pharmaceutical solutions and quality client service in order to improve clinical outcomes for its clients’ health benefit plan members while assisting its clients and their plan members in better managing overall health care costs. PBM Services Plan Design and Administration: The company’s clients sponsor pharmacy benefit plans that facilitate the ability of eligible members in these plans to receive prescribed medications. It assists its clients in designing pharmacy benefit plans. The company also administers these benefit plans for its clients and assists them in monitoring the effectiveness of these plans through frequent, informal communications, as well as through a formal annual client review. The company makes recommendations to its clients encouraging them to design benefit plans. Formulary Management: The company utilizes an independent panel of doctors, pharmacists, and other medical experts, referred to as its Pharmacy and Therapeutics Committee, to select drugs that meet the standards for inclusion on its drug lists. Its drug lists provide recommended products in various drug classes to ensure member access to clinically appropriate alternatives under the client’s pharmacy benefit plan. To improve clinical outcomes for members and clients, the company conducts ongoing, independent reviews of all drugs, including those appearing on the drug lists and generic equivalent products, as well as its clinical programs. Discounted Drug Purchase Arrangements: The company negotiates with pharmaceutical companies to obtain discounted acquisition costs for various products on its drug lists, and these negotiated discounts enable the company to offer reduced costs to clients that choose to adopt its drug lists. The discounted drug purchase arrangements the company negotiates provide for volume discounts and/or the payment by the pharmaceutical companies of retroactive discounts, or rebates, from established list prices. For certain products that are purchased by its pharmacies, the company receives discounts at the time of purchase and/or discounts for prompt payment of invoices. Medicare Part D Services: The company participates in the administration of the drug benefit added to the Medicare Part D through the provision of PBM services to its health plan clients and other clients that have qualified as Medicare Part D prescription drug plans (PDPs). It also participates by offering Medicare Part D pharmacy benefits through its subsidiaries, SilverScript and Pennsylvania Life, which have been approved as PDPs by the Centers for Medicare and Medicaid Services (CMS); and by assisting employer, union, and other health plan clients that qualify for the retiree drug subsidy available under Medicare Part D by collecting and submitting eli