Commentary

CVS Taps Postal Service For Last-Mile Rx Delivery Nationwide

With the expectation of Amazon entering the Rx business, CVS Pharmacy yesterday announced it will deliver prescriptions to customers’ homes in a day or two for $4.99. Consumers can either use the CVS Pharmacy app or phone the order in to their neighborhood pharmacy nationwide. The U.S. Postal Service will then deliver it.

“CVS Health runs more than 9,800 retail locations nationwide, including pharmacies inside Target stores. The company started a curbside pick-up service a few years ago, and it was already offering deliveries from about 1,600 locations,” writes the AP’s Tom Murphy.

“CVS also processes more than a billion prescriptions annually as a pharmacy benefits manager, or PBM, and it provides mail-order deliver through that business. But a company representative has said the delivery service would be a faster alternative and have a wider reach than mail-order,” Murphy continues.

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“CVS executives last year said they would launch the service, but didn’t say how they would handle the last-mile delivery, an expensive service that has vexed many businesses. It has chosen the Postal Service to carry out a mission that other major retailers have tasked to parcel giants like United Parcel Service Inc. or FedEx Corp. — or turned over to startups,” writes Sharon Terlep for the Wall Street Journal. “Target Corp. last year paid $550 million to acquire grocery delivery startup Shipt Inc., in an effort to quickly expand shipping services,” Terlep adds.

“Along with eligible prescriptions, select health care products can also be delivered through the mail. Cold and flu remedies, allergy medications, pain relief, first aid, digestive health, vitamins, baby, personal and feminine care products are among the items that can also be shipped,” reports Matt Durr for Mlive. “Controlled substances, medications that require refrigeration and medications paid for by Medicare B are not eligible for delivery.”

As it anticipated, CVS also is also expanding the same-day prescription delivery service it launched last year in New York City to Boston, Miami, Philadelphia, San Francisco and Washington, D.C. For $8.99, orders placed by 4 p.m. local time will be delivered by 8 p.m. Monday through Friday; on Saturday and Sunday, orders received by 11 a.m. are delivered by 4 p.m.

“Almost 10% of the more than $1.3 trillion in total retail sales in the first quarter of 2018 came from e-commerce, according to the U.S. Census Bureau. That's up 16.4% from the same period in 2017,”  Zlati Meyer reports for USA Today.

“While it remains to be seen whether Amazon decides to get into the prescription-drug business, the e-commerce giant already sells over-the-counter medication, including an exclusive line called Basic Care. And Amazon could stand to put a lot of pressure on the pharmacy businesses including CVS, should it start to directly compete by delivering prescription drugs,” writes Lydia Ramsey for Business Insider

“Elsewhere, startups including Capsule and PillPack have set up delivery services as an alternative to picking up prescriptions at a pharmacy, either by courier or by mail,” Ramsey continues.

“CVS is in the midst of merging with Aetna,” Leia Klingel reminds us for Fox Business. “CVS proposed a $69 billion mega-merger that would create a diverse healthcare company combining an insurer, retail pharmacy and pharmacy benefits manager. There have been hopes that such a business combination could lower prescription costs.”

Yesterday, the American Medical Association yesterday urged regulators to block the merger, however, based on evidence indicating its “likely anticompetitive effects on Medicare Part D, pharmacy benefit management services, health insurance, retail pharmacy, and specialty pharmacy.” 

The 2018 Walker Sands Future of Retail report found that 35% of consumers would use Amazon to fill prescription orders online. The top reasons given to use Amazon were the ability to ship quickly (61%) existing trust in Amazon (54%) and an easier ordering process due to Amazon’s access to customer information (43%).

Younger consumers are more willing to use Amazon pharmaceuticals — 46% of those 18-25 and 51% of those 26-35. Just 12% of those over the age of 61 were open to using the service. “However, given CVS has been an established, trusted pharmacy for many years, CVS may secure the senior market before Amazon can,” a Walker Sands spokesperson says in an email.

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