Blog | Innovation and Disruption

Analysis: What CVS’s paid membership expansion means for healthcare

Blog | Innovation and Disruption

Analysis: What CVS’s paid membership expansion means for healthcare

  • CVS Pharmacy, the retail division of CVS Health, announced Aug. 5 that customers can enroll in its paid CarePass membership at participating CVS Pharmacy locations nationwide or online. 
  • As a complimentary good, CVS’s loyalty and membership CarePass program increases the disruptive potential of the CVS/Aetna merger.

CVS Pharmacy, the retail division of CVS Health, announced Aug. 5 that customers can enroll in its paid CarePass membership at participating CVS Pharmacy locations nationwide or online.  

“The loyalty and membership program, which differs from its free ExtraCare program, offers free one- or two-day delivery on eligible prescriptions, plus CarePass members receive various other benefits when they join including free one- or two-day delivery on other eligible purchases made from CVS.com,” according to a Retail Dive article.

Membership is $48 annually or $5/month for a month-to-month membership, according to the article. The retailer initially piloted the membership in Boston.

CVS also said that early results from its previous launch in select markets showed that "CarePass appeals to a broad consumer audience, 20% of whom are millennials" and that purchases among members are 15% to 20% higher on average.

“In addition to the free delivery and phone consultations, CarePass members receive special discounts on CVS health brand items, including over-the-counter medications, vitamins and supplements, and personal care items. And, at least for now, CarePass also provides a $10 promotional reward each month that can be used on many items in the store or online,” Retail Dive reported.

Takeaway

Helping CVS disrupt traditional providers

One way to look at CarePass is that it’s designed to defend CVS’s market share against Amazon Prime’s well-documented encroachment into groceries, cosmetics, OTC drugs and early efforts to break into the virtual pharmacy business (e.g. online pharmacy PillPack) while also growing CVS’s share of wallet.

And that’s correct but misses the bigger picture for providers and health plans. This is the classic complementary good when you think about this in the context of CVS’s planned expansion of Health Hub stores (1,500 more coming soon to a corner near you), and its ownership of Aetna. As a complimentary good, CarePass increases the disruptive potential of CVS/Aetna, which is discussed in this HFMA podcast. This latest move helps CVS cross-market its Minute Clinic and telehealth offerings, increasing the volume of patient referrals CVS/Aetna providers or affiliated providers will influence, which will likely reduce referrals to specialists and hospitals not aligned with CVS/Aetna.

Beyond the general public, the impact could be multiplied if it were integrated into Aetna’s health plan offerings. The convenience and discounts would be valued by employees. So, it could be included as part of the benefit design for Aetna’s ERISA plans. Given CVS’s investments in telehealth, it’s probably not long until they follow Humana’s lead and offer a product where telehealth is the first option for primary care. You couple that with CarePass, and it is an ideal product for the millennial market.

At the other end of the age continuum, where utilization is higher, Aetna could also incorporate the offering into its Medicare Advantage products making their plans more attractive (extra convenience/benefits) and providing yet another tool to help them understand their members behavior, manage care and manage referrals.  

About the Author

Chad Mulvany, FHFMA,

is director, healthcare finance policy, strategy and development, HFMA’s Washington, D.C., office, and a member of HFMA’s Virginia-Washington, D.C., Chapter.

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