• by Sarah Mahoney  @mahoney_sarah, November 1, 2018

CVS Pharmacy thinks its customers are ready for prescription Prime time, and says it is testing CarePass, a fee-based membership program offering plenty of perks for $5 a month. The pilot, available only in the Boston area, comes as drug chains navigate the increasingly complex pharmacy business, in flux amid mega-mergers and Amazon’s imminent leap into the Rx biz.

Ads for CarePass tout the convenience of the new rewards program, which builds on its existing ExtraCare Rewards by adding free delivery on most medications and other purchases, access to a pharmacist hotline 24 hours a day and 20% off all generic CVS Health products.

Other marketing efforts include more than 20 pop-up events, with CVS branded trucks and cars throughout the area.

Members, who can also opt for an annual fee of $48, also get a monthly $10 reward that can be used toward nearly all items, both instore and online.

Wondering why the Woonsocket, R.I.-based retailer thinks it’s smart to give away $10 for every $5 it collects for the CarePass program? Now that it’s gotten conditional approval from the Justice Department for its $69 billion merger with Aetna, it’s out to do what it can to build loyalty among consumers for all their drug needs. Besides battling the usual competitors -- including Walgreens, Walmart and Target -- it’s also mindful of Amazon’s next move. 

While observers have long expected a major disruptive play from the e-commerce giant, Amazon’s recent $1 billion acquisition of startup PillPack has led to speculation that Amazon will act sooner rather than later.

 “CVS’s CarePass pilot is a defensive move designed to lock in customer loyalty before Amazon makes a full assault on the pharmacy market,” says Neil Saunders, managing director of GlobalData Retail.

Yet he doubts it will do much to blunt Amazon’s eventual impact. “PillPack, which Amazon wants to grow, is innovative in the way it delivers drugs, how it uses digital to let consumers manage prescriptions, and the way in which it provides customer service,” he tells Marketing Daily. While CVS’ discounts may be helpful, “this only really brings CVS prices into line with Amazon, which is already cheaper even without the Prime service.”

CVS’ real problem, he says, continues to be its lackluster stores and apparent lack of interest in investing in the shopping experience. “Making shops places where people want to come for both advice and products ultimately helps to protect the healthcare division of the business.”

In its most recent quarterly results, CVS reported that while overall same-store sales rose 5.9% and same-store pharmacy results increased 8.3%, “front of store” sales, a category that includes everything from food to beauty to greeting cards, dropped 1%.