Analyst: Free Delivery Helps CVS Compete Against Amazon
CVS Pharmacy’s new CarePass loyalty program, which includes free prescription delivery, will likely help it better compete against Amazon and other online retailers, an analyst says.
“CVS and other retail pharmacies will want to boost their home-delivery capabilities so they are not playing catch-up with Amazon. Retail pharmacies feel an imperative to build their loyalty programs before Amazon applies greater focus in this field,” Ash Shehata, advisory principal for professional services firm KPMG’s Healthcare & Life Sciences Practice, tells Drug Topics.
In late October, CVS launched the pilot membership rewards program in the Greater Boston area. For $5 a month or $48 a year, CarePass customers receive free delivery on most medications and purchases, 20% off all CVS Health private label products, and access to a 24/7 pharmacist hotline.
“We are committed to designing and testing innovative programs that meet our customers’ health needs whenever, wherever, and however they want,” says Kevin Hourican, executive vice president of CVS Health and president of CVS Pharmacy, in a statement.
However, CVS faces stiff competition in the prescription-delivery arena since Amazon acquired the online drugstore PillPack, which delivers medications in presorted dose packaging and coordinates refills and renewals. Plus, other innovative online drug stores, such as Capsule Pharmacy, are competing for brick-and-mortar stores prescription business.
Shehata says CVS and other drug store chains can succeed in the prescription-delivery space. “CarePass doesn’t have the same benefits as Amazon Prime, but the program does offer value to consumers and expands upon its current loyalty program with the home-delivery benefit.”
Plus, CVS’s merger with Aetna adds numerous additional touch points to reach consumers, Shehata notes. The use of [CVS loyalty] data—paired with data from a PBM, an urgent care clinic, or the Aetna health plan—can help CVS obtain a 360-degree view of a person’s behavior and health situation. The discounts, coupons, and convenience can help keep a customer engaged, but understanding customer behaviors can help save money on medical spending by offering earlier interventions of preventive care or helping with medication adherence,” Shehata says.
To succeed with CarePass, CVS needs a mix of in-store promotion, staff training, and promotion to existing customers to highlight the value of the program, according to Shehata. “With a base of nearly 10,000 stores and an existing loyalty program, it might not be that big of a leap for the company to build CarePass into something that can be applied nationally,” he says.
Prescription delivery services are not “too little, too late” for large pharmacy chains, Shehata adds. “Delaying them, however, would create additional competitive barriers.”
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