CVS Health SWOT & PESTLE Analysis

Strength

1. Largest drug retailer in the U.S.A.: CVS Health is the nation's largest drugstore chain operating over 9800 retail locations in 49 states, the District of Columbia, Puerto Rico and Brazil. The US drugstore market is ruled by 2 dominant players CVS Health and Walgreens. Drug Channels reported that these two behemoths attributed for over 29% of the total prescription dispensing revenues in America in 2016. A research by Barclays’ Meredith Adler points that over 50% of the drugstore markets in around 70 of the top 100 metropolitan areas are controlled by CVS Health and Walgreens. In 2017, CVS Retail Pharmacy segment's market share was approximately 56.58%. About 5 million customers are served by CVS Pharmacy each day and 2.4 billion adjusted prescriptions were dispensed or managed annually by them.

2. Leading Pharmacy Benefits Company through Caremark pharmacy services: Pharmacy Benefit Managers (PBMs) reduce prescription drug costs and improve convenience and safety for consumers, employers, unions, and government programs. They are a third party of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans.CVS Health is one of the largest PBM in the United States (the other 2 major players being Express Scripts and United Health Group) with the Company's PBM Mail choice segment's market share approximating to about 48.51%. In 2016, CVS was the large with the acquisition of Caremark in 2007, CVS entered the PBM arena and alongside integrated its extensive supply chain and distribution network. CVS earns about 70% of its annual sales from its holistic range of pharmacy benefit management services. CVS's revenue in Q2 FY 2017, from its pharmacy benefits-management (PBM) business, spiked 9.5% year over year, to $32.3 billion. This growth was attributed to soaring pharmacy-claim volume, higher brand-drug prices, and increased specialty drug volume. CVS operates PBM for its over 94 million PBM plan members through 68000+ retail network pharmacies.

3. Consistent strong performance and financials building shareholder value: CVS featured on Rank # 8 on Fortune U.S. 500 list in 2019 and has featured on the Fortune Global 500 list for 24 years. It has shown consistent performance and maintains a strong bottom line. Revenues have shown a consistent upward spiral for the last 5 year term. Consolidated new revenues in Q4 2017 jumped 5.3% year-on-year to $48.4 billion with operating profit changing to $3.2 billion, soaring 5.7%. Free cash flow saw a leap of 143% to $642 million. Consolidated new revenues for full year of 2018 stood at $194.6 billion with 5.3% climb over FY 2017 and an approx. 27% climb over FY 2015 where the figure stood at $153.29 billion.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

1. Ageing population in the United States to boost spending on healthcare: United States will witness a considerable growth in the number of people in the age bracket 65 and above from 2012 to 2050 according to census.gov data. As of 2012, 43 million people were in the age category 65 and above which will shoot up to 83 million by 2050. This will provide a major growth fillip to the entire healthcare industry with a direct correlation existing between persons age and spending on healthcare. As per 2012, National Health Expenditure Data, personal healthcare spending by 65 years older population stood at $18,988 which was approximately 3 times the spending per working-age person at $6,632. Thus, this increase in the growing pool of aged population will aid to CVS Health's long-term growth.

2. Increasing chronic diseases in United States a major concern: Increasing number of chronic disease cases in the United States is a major concern and more so is the growing cost of treating. The traditional health care system in the country lacks convenience and coordination which makes frequent engagement with consumers and patients difficult. For instance, as of 2017 there are approx. 30 million Americans suffering from diabetes, costing the health care system approximately $245 billion annually. The integration of CVS and Aetna will create strong platform which will enable remote monitoring of key health indicators. Patients can start receiving text messages whenever their sugar levels deviate from normal, receive counseling on medication adherence and take part in ancillary health related services.

Technological

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Legal

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Environmental

1. Enterprise-wide environmental strategy and compliance measures: The importance between the environment and human health is being increasingly realized. CVS as a healthcare company working towards improving people’s lives needs to set the highest standards for long-term sustainability of its business. The company has undertaken several initiatives such as reduction in energy use, increasing use of renewable, reduction in usage of raw materials and waste generated and employing LEED and Energy Star standards in the construction amongst others to minimize the enterprise-wide climate-related impacts. CVS Health has also developed an internal Environmental Compliance Policy which applies across its job functions. The company ensures that it is in compliance with federal, state and local environmental laws. It has also developed programs and appropriate trainings for its employees so as to ensure that regulatory requirements are properly implemented.