CVS buys Target’s pharmacy business: So what?
Monday, June 29, 2015
In a move that caught nearly everyone by surprise, CVS Health announced June 15 that it would purchase and begin operating the retail pharmacy business for Target.
Soon, nearly 1,700 Target pharmacies and pharmacy personnel will be rebranded as a CVS/pharmacy operating within the Target stores. The move puts $1.9 billion into the pocket of Target, which had struggled to make a profit from its prescription business line.
Even Adam Fein — noted expert on all things related to drug distribution in the U.S. and author of the popular Drug Channels blog — wrote, "Wow. I didn't see this coming." I suspect most pharmacists didn't see this coming either — I certainly didn't.
However, in my own discussions with Target pharmacists, it has been clear for some time that Target had not figured out how to become profitable. Thus, the "writing on the wall" suggested some sort of change was coming. That change just happened.
As a pharmacist who has spent most of his career in the retail/outpatient market, I cannot help but wonder about the implications of this purchase for the pharmacy profession. In particular, I wonder about what it means for the pharmacists and technicians currently employed at Target.
I don't have a crystal ball, but I'm not afraid to make a few observations and throw my predictions into the mix and flurry of other comments currently being offered. I think there is a silver lining of good news as well as a few lingering concerns.
The good news
On a positive note, Target pharmacy personnel can stop wondering about how they will become profitable. The deal is done. CVS is their new employer (assuming they accept the employment offers CVS claims they will make to all existing Target pharmacy employees).
Whether you view the acquisition as good or bad, at least now the employees can make decisions based on the knowledge of what has happened. You will be wearing a CVS badge. You will be a CVS pharmacist or tech.
Additionally, the acquisition may open up new doors and opportunities for Target pharmacy personnel. Employees of Target pharmacy went overnight from a 1,700-store merchandise-focused chain to a 9,600-store pharmacy-focused chain.
Their old employer just ran pharmacies. Their new employer owns a PBM, Specialty Pharmacy and LTC division — all of which offer career paths for pharmacists. For those looking to climb the corporate ladder, the ladder suddenly has become a lot wider and a lot taller.
In spite of the fact that this move was likely a good deal for both CVS Health and Target from a strictly business standpoint, pharmacy personnel are surely left with some lingering concerns.
First, what will happen to those pharmacists and technicians who simply do not want to work for CVS? Maybe they left CVS to go to Target years ago, only to find themselves back with their old employer again. These folks will find themselves instantly in a job search and may discover how challenging the task of finding suitable employment in a nearly saturated market can be.
I also wonder about those pharmacists currently in middle management with Target. Will there be room for them in the new structure to maintain an equivalent position after the buyout is completed? It is hard to say.
Next, those who choose to stick it out may also be left wondering what will happen if CVS cannot make their location profitable. If the pharmacy happens to be located in an area of the country currently saturated with CVS pharmacies, it is difficult to imagine that CVS will allow an unprofitable location to remain open long. Transferring the business to the closest CVS at some point would seem inevitable.
Finally, what about benefits, vacation time and corporate culture? Each employer offers a unique experience for the employee with respect to these critical areas and will translate into different levels of job satisfaction.
I know of many happy CVS employees and am not suggesting that the transition is a bad thing, but change is change. And changes in benefits and culture will undoubtedly create concerns and anxiety for many.
Frankly, it is too soon to predict what all this will look like a year from now. What will ultimately happen next to the 1,700 stores and pharmacy personnel is hard to say.
I think CVS will figure out how to make many of them profitable that were not profitable before. I don't think there is need to panic. The sky isn't falling. But pharmacy professionals impacted by this need to be actively managing their careers rather than passively waiting for something to happen.
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