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Post cigarettes, CVS looks to grow as a health company

Dan Weissmann Aug 4, 2015
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The pharmacy counter was always in the back of a CVS for a reason. 

As Charles Rhyee, a Cowen and Company analyst, puts it, “They’re hoping that on your way out, you’ll realize, ‘Hey, I need some toothpaste. Or maybe I’ll pick up a newspaper or some gum at the front.’ And all of those are actually higher-margin items” than just picking up a prescription.

Now, the company is investing in providing health services. It’s taken over the pharmacy counter at hundreds of Target stores. CVS, which reports its quarterly earnings Tuesday, bought Omnicare, a company that provides prescription drugs to long-term care facilities. And for years it has been expanding walk-in clinics in its stores.  

That’s what has Mohan Naidu’s attention. He’s a health-care analyst with Oppenheimer. “Convenience care, or the retail care, is going to be one of the biggest growth drivers in the next decade,” he says.

With lots of people getting pushed into high-deductible plans by their employers, Naidu sees an ever-growing number of health-care consumers becoming ever-more cost-sensitive. Advantage: CVS. “The cost is definitely significantly lower going to a retail clinic than going to a physician’s office,” he says. 

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