Prescriptions are not pizza: CVS delivery plan raises questions
Wednesday, November 08, 2017
"Thank you for calling CVS Pharmacy. Will this be for pickup or delivery?"
That may be the new greeting at the nation's largest pharmacy chain if things go as planned, according to information released during a recent earnings call. CVS is planning to offer next-day prescription delivery throughout the U.S. beginning in early 2018, with some communities offering a same-day delivery option as well.
No doubt this latest announcement is related to growing concern that Amazon is thinking about moving into pharmacy. If the company that put "home shopping" on the map decides they can really compete in the prescription biz, major players like CVS and Walgreens could stand to lose market share. Fears have caused a little nose dive in their stock prices.
But CVS Health CEO Larry Merlo wasted no time coming forward with a prescription home-delivery plan, a sign that he has no intention to simply let Amazon move in without a fight.
For many communities, home delivery from the local pharmacy has been a service of independent pharmacies, so this new move may be seen as an intrusion on their territory as well. But CVS appears committed to offering every convenience possible to maintain and grow their customer base.
Helena Foulkes, CVS Health executive vice president and CVS pharmacy president, made the customer-service focus crystal clear: "Our goal is to meet the needs of all of our customers wherever, however and whenever they want. Providing same- and next-day options for delivery of medications is just another way we can help our patients get and stay healthy."
But as someone who knows a little about the pharmacy business, I do have to wonder if CVS is bluffing.
With a player the size of Amazon moving into the game, they had no choice but to offer a competing service to prevent patient loss. But service always comes with a price. And you have to wonder if the cost of providing home delivery on such a grand scale is feasible.
Prescriptions are not pizza. Pharmacy margins are currently so low that major chains like Target and Rite Aid found it difficult to survive. The introduction of a prescription delivery service from local pharmacies is far more expensive than a centralized mail-order program.
The concept of hand delivering medications to home has been around for decades. Chains have avoided it for the simple reason that it doesn't make financial sense. That fact hasn't gone away simply because Amazon wants a piece of the prescription pie.
The whole concept raises many questions. How will CVS operationalize this? Will each local CVS hire their own driver? Uber? Will they 1099 independent contractors?
Amazon leaves packages on the doorsteps of homes. Will the doorsteps of hundreds of homes in each community suddenly have big red-and-white CVS boxes and packages sitting on their porches? What will be the impact of that move on possible drug diversion and theft?
Additionally, the loss of foot traffic in the stores due to home delivery is bound to have a negative impact on sales, making the plan a double-loss. It is hard to walk through a well-merchandized store without giving in to the temptation to buy something that catches your eye. But all that is gone with home delivery. Trying to make up for it by offering a few OTC items for the home delivery patients to purchase just won't work.
Listen. Hear that whooshing sound? Is it the sound of a delivery truck leaving the local CVS and bringing medications to your home? Maybe. Or it could be the sound of millions of dollars in profits being lost in a risky effort to compete with a questionable competitor like Amazon. Only time will tell.
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