CVS-Aetna Merger and Walgreens-LabCorp Partnership: Assessing The Impact

In separate moves, the two largest pharmacy retailers dramatically changed their businesses. CVS merged with healthcare insurance giant Aetna. But Walgreens also had news – the drugstore giant merged with clinical reference company LabCorp to put an announced 600 consumer testing stations in its retail stores. Both are a good sign for the market for in vitro diagnostics.

Kalorama Information has covered direct to consumer testing and retail clinics in previous reports.

This month, the Department of Justice (DOJ) approved the $69 billion proposed merger between health insurer Aetna and CVS Health. The Aetna-CVS merger reinforces the strategy of using retail clinics and the status of CVS as a provider, and testing is a component of that.  Kalorama has covered retail clinics for over a decade from when the trend involved just a few hundred stores.  According to Kalorama’s 2017 survey, CVS was the most common store where a retail clinic was located. 93% of retail clinic users are satisfied, 46% of them very satisfied, according to the survey.

In the case of Walgreens, they are now creating new venues for the sale of clinical tests in their stores. That is likely to result in new testing.  We’ve covered retail clinics since 2007 and there was always a fear that retail clinics would take business from hospitals and physicians. There is some of that, but we believe based on market analysis and survey data that retail clinics tend to create new healthcare visits. New visits are a positive sign for sales of tests.  If that’s happening with retail clinics already, it’s easy to see the new Walgreens-LabCorp stations creating new healthcare usage as well.

Retailers and to some degree consumers have already expressed their confidence. Marketers of IVD products and clinical test services have to consider the new venues and make them part of business plans. Consumers like it and for the pharmacies, there’s a benefit of indirect revenue from sales made by clinic customers.

CVS’s move into healthcare insurance, combined with strong consumer dissatisfaction with current healthcare options, comes amid similar moves into the healthcare space by other players, some until recently perceived as outsiders such as Amazon, Berkshire Hathaway and JPMorgan. Such new players are likely to bring a fresh approach to healthcare, translating practices that have proven successful in other industries.

According to Walgreens, The company and LabCorp announced their mutual commitment to a significant expansion of their LabCorp at Walgreens collaboration. The two companies have agreed to open at least 600 LabCorp patient service centers at Walgreens stores across the U.S. over the next four years, inclusive of the 17 locations that have opened since they first announced their consumer-focused initiative in June 2017. LabCorp at Walgreens locations are currently open in Florida, Colorado, North Carolina and Deerfield, Illinois, serving as an important part of LabCorp’s network of nearly 2,000 patient service centers across the U.S. Consumers and healthcare providers continue to have a positive response to the existing locations, which offer specimen collection services for LabCorp testing in a secure, comfortable environment. The sites are located near the pharmacy area.

Both moves could affect sales of cholesterol and glucose, also HIV, TB, influenza and any routine testing panels. The Walgreens/LabCorp partenrship would seem to most impact urine tests, CBC, strep swab, mono tests..  These are the type of tests that are viable for a patient-station type setting.

Kalorama has a number of market research studies in relevant areas.

Kalorama Information’s report, Retail Clinics: Customer Survey 2018, was designed to mirror U.S. regional, income, age and education demographics. The report can be found at  Kalorama completely covers the market for IVD in its report, The Worldwide Market for In Vitro Diagnostics, 11thEdition.