WEBVTT 00:00:00.000 --> 00:00:03.700 Welcome back to the Deep Dive. Today we are unpacking 00:00:03.700 --> 00:00:05.919 a company that you probably see maybe every week, 00:00:05.980 --> 00:00:09.320 but its real size, its true complexity is so 00:00:09.320 --> 00:00:11.359 much bigger than what you see on the store shelves. 00:00:11.519 --> 00:00:14.419 Oh, much bigger. We're diving deep into CVS Health. 00:00:14.640 --> 00:00:16.339 And it's important to just, you know, set the 00:00:16.339 --> 00:00:18.519 stage right away. This is not just a retail chain 00:00:18.519 --> 00:00:20.699 we're talking about. We're looking at the second 00:00:20.699 --> 00:00:22.500 largest health care company in the world. Second 00:00:22.500 --> 00:00:25.059 largest. Who's number one? United Health Group. 00:00:25.460 --> 00:00:29.179 But CVS is right there behind them. That scale 00:00:29.179 --> 00:00:31.199 is just, it's hard to wrap your head around. 00:00:31.320 --> 00:00:33.420 I mean, we're looking at the 2024 financials 00:00:33.420 --> 00:00:37.200 and the revenue was, what, U .S. $372 .8 billion? 00:00:37.640 --> 00:00:40.560 Billion, with a B. And they have something like 00:00:40.560 --> 00:00:44.780 300 ,000 employees. It's a true behemoth. Right. 00:00:44.880 --> 00:00:47.020 And the sources you've provided, they give us 00:00:47.020 --> 00:00:49.799 this complete picture from their history of just 00:00:49.799 --> 00:00:53.039 aggressive acquisitions to this incredibly complex 00:00:53.039 --> 00:00:57.579 web of subsidiaries. And crucially. decades of 00:00:57.579 --> 00:01:00.140 some very serious legal and ethical problems 00:01:00.140 --> 00:01:02.380 that just seem to follow a company that gets 00:01:02.380 --> 00:01:05.620 this powerful. So our mission today is really 00:01:05.620 --> 00:01:08.900 to get past that image of consumer value stores. 00:01:09.420 --> 00:01:12.480 That's actually what CVS stood for back in 1963. 00:01:12.920 --> 00:01:15.560 I have no idea. Yeah. And we need to understand 00:01:15.560 --> 00:01:18.379 how they built this. This vertically integrated 00:01:18.379 --> 00:01:21.340 giant, how they got control of prescription management 00:01:21.340 --> 00:01:24.459 with Caremark, insurance with Aetna, and then 00:01:24.459 --> 00:01:26.739 the retail clinics with MediClinic. And there's 00:01:26.739 --> 00:01:28.920 a real tension there, isn't there? This massive 00:01:28.920 --> 00:01:31.099 scale on one hand, but it brings this massive 00:01:31.099 --> 00:01:33.480 scrutiny on the other. It always does. OK, so 00:01:33.480 --> 00:01:35.480 let's break this down. We're going to trace the 00:01:35.480 --> 00:01:38.200 path from one single store in Massachusetts to 00:01:38.200 --> 00:01:41.060 this global powerhouse. We'll look at the pillars 00:01:41.060 --> 00:01:43.500 of their current structure and we'll definitely 00:01:43.500 --> 00:01:46.439 spend a lot of time on the controversies, especially. 00:01:46.640 --> 00:01:49.000 the opioid crisis and, you know, the issues with 00:01:49.000 --> 00:01:51.200 prescription costs. For you, the goal is to see 00:01:51.200 --> 00:01:53.000 how this company isn't just selling you shampoo. 00:01:53.099 --> 00:01:56.060 They are actively, really actively shaping the 00:01:56.060 --> 00:01:58.920 entire American health care system. So the origin 00:01:58.920 --> 00:02:01.620 story is it's deceptively simple. It starts in 00:02:01.620 --> 00:02:04.420 1963, Lowell, Massachusetts. It was founded by 00:02:04.420 --> 00:02:07.200 two brothers, Stanley and Sidney Goldstein, and 00:02:07.200 --> 00:02:10.539 their partner, Ralph Hoagland. And it was just 00:02:10.539 --> 00:02:12.840 a store selling health and beauty products. No 00:02:12.840 --> 00:02:15.800 pharmacy. No pharmacy at the beginning. That 00:02:15.800 --> 00:02:17.939 was the key. The name, Consumer Value Stores, 00:02:18.000 --> 00:02:21.979 was literal. It was all about low prices on everyday 00:02:21.979 --> 00:02:24.879 items. So when did the pharmacy piece come in? 00:02:24.979 --> 00:02:27.300 Because that seems like the entire identity of 00:02:27.300 --> 00:02:31.419 the company now. It took four years, 1967. That's 00:02:31.419 --> 00:02:33.439 when they opened their first stores with actual 00:02:33.439 --> 00:02:36.080 pharmacy departments, one in Warwick, one in 00:02:36.080 --> 00:02:38.080 Cumberland, Rhode Island. And that was the pivot. 00:02:38.139 --> 00:02:40.419 That was the game changer. That was the strategic 00:02:40.419 --> 00:02:42.860 shift. It established this dual identity that 00:02:42.860 --> 00:02:45.219 they still have today. Yeah. A retail store, 00:02:45.340 --> 00:02:47.819 but one that's anchored by this essential health 00:02:47.819 --> 00:02:50.219 care service. And then the other defining piece 00:02:50.219 --> 00:02:52.900 of their DNA showed up just two years later. 00:02:53.099 --> 00:02:55.699 Aggressive expansion. Fueled by corporate change. 00:02:55.919 --> 00:02:58.800 Exactly. In 1969, they were sold to the Melville 00:02:58.800 --> 00:03:01.719 Corporation, which is this huge retail conglomerate. 00:03:01.719 --> 00:03:03.400 And that wasn't just a sale. It was like getting 00:03:03.400 --> 00:03:05.819 a massive injection of cash. It's what let them 00:03:05.819 --> 00:03:08.379 go from being a regional player to a national 00:03:08.379 --> 00:03:11.099 one. And that's when the acquisition sprint really 00:03:11.099 --> 00:03:13.740 kicks off. For what, the next three decades? 00:03:13.979 --> 00:03:17.199 Pretty much. By 1970, they already had 100 stores 00:03:17.199 --> 00:03:20.039 just in the Northeast. But they knew that wasn't 00:03:20.039 --> 00:03:22.159 enough. They needed to go national. Right. And 00:03:22.159 --> 00:03:24.039 you can see their strategy on the map. It's so 00:03:24.039 --> 00:03:27.819 methodical. In 1972, they buy 84 Clinton drug 00:03:27.819 --> 00:03:30.000 and discount stores. And that was their first 00:03:30.000 --> 00:03:32.539 big leap, right, into the Midwest. That was it. 00:03:32.960 --> 00:03:35.240 Centered in Indiana. They learned very early 00:03:35.240 --> 00:03:38.400 on that it's just faster to buy your way into 00:03:38.400 --> 00:03:40.400 a market than to build from scratch. Okay, so 00:03:40.400 --> 00:03:41.900 they keep filling in the map. Let's jump ahead. 00:03:42.360 --> 00:03:46.000 1990. 1990, they buy 500 people's drugstores. 00:03:46.120 --> 00:03:49.319 500? And this one was vital. It gave them a huge 00:03:49.319 --> 00:03:51.379 presence in the Mid -Atlantic. We're talking 00:03:51.379 --> 00:03:55.300 D .C., Pennsylvania, Maryland, Virginia. It wasn't 00:03:55.300 --> 00:03:57.550 random growth. They were targeting these critical 00:03:57.550 --> 00:04:00.689 population centers. And then in the late 90s, 00:04:00.689 --> 00:04:02.930 the scale just gets, I mean, it gets kind of 00:04:02.930 --> 00:04:04.469 overwhelming. Well, that's when they were spun 00:04:04.469 --> 00:04:07.409 off from Melville. 1996, they start trading on 00:04:07.409 --> 00:04:09.229 the New York Stock Exchange as their own company. 00:04:09.389 --> 00:04:11.530 And they immediately go on a shopping spree. 00:04:11.689 --> 00:04:16.189 A huge one. In 1997, they acquire over 2 ,500 00:04:16.189 --> 00:04:19.149 Revco drugstores. Let's just pause on that. 2 00:04:19.149 --> 00:04:24.819 ,500 stores. In one transaction. Yes. It cemented 00:04:24.819 --> 00:04:27.120 their footprint across the Midwest, the Southeast, 00:04:27.300 --> 00:04:29.980 and the East. Overnight, they went from being 00:04:29.980 --> 00:04:34.079 a major player to an undisputed national contender. 00:04:34.139 --> 00:04:36.019 It happened in a single quarter. And they kept 00:04:36.019 --> 00:04:38.379 being precise, like when they wanted to get into 00:04:38.379 --> 00:04:41.459 Michigan. They just bought their way in. 207 00:04:41.459 --> 00:04:44.300 Arbor drugstores in 1998. It was like they were 00:04:44.300 --> 00:04:46.860 playing a game of Risk. just strategically taking 00:04:46.860 --> 00:04:49.120 over territories. But at the same time, while 00:04:49.120 --> 00:04:50.740 they're doing all this brick and mortar consolidation, 00:04:51.199 --> 00:04:53.519 they're also looking at the Internet. Yeah, which 00:04:53.519 --> 00:04:55.360 is something a lot of people forget. They were 00:04:55.360 --> 00:04:58.339 a pioneer in online pharmacy. With Soma .com. 00:04:58.459 --> 00:05:02.560 Right. In 1999, CVS buys Soma .com, which was 00:05:02.560 --> 00:05:04.899 the first online pharmacy in the country. They 00:05:04.899 --> 00:05:08.480 quickly rebranded to CVS .com. And suddenly, 00:05:08.620 --> 00:05:10.899 they're the first company that's truly integrated. 00:05:11.120 --> 00:05:13.459 Both physical and digital. Exactly. They saw 00:05:13.459 --> 00:05:15.439 where things were going. And they wanted to control 00:05:15.439 --> 00:05:18.459 that channel right away. And that desire to control 00:05:18.459 --> 00:05:20.959 the channel, and more importantly, the customer 00:05:20.959 --> 00:05:23.839 data, that leads directly to the extra care card. 00:05:24.019 --> 00:05:27.360 Launched in 2001. And to the average person, 00:05:27.420 --> 00:05:28.939 it just looks like a discount card. Yeah, you 00:05:28.939 --> 00:05:31.779 scan it, you get a coupon. But for CVS, it was 00:05:31.779 --> 00:05:35.180 this unbelievably powerful data collection engine. 00:05:35.600 --> 00:05:39.560 The success was just, it was staggering. 30 million 00:05:39.560 --> 00:05:41.720 people signed up in the first year. 30 million? 00:05:42.170 --> 00:05:44.709 In a year. And it eventually grew to over 70 00:05:44.709 --> 00:05:47.170 million cardholders. At the time, it was the 00:05:47.170 --> 00:05:49.149 largest retail loyalty program in the country. 00:05:49.509 --> 00:05:53.329 And it gave CVS this incredible ability to track 00:05:53.329 --> 00:05:55.879 everything. Not just what shampoo you bought, 00:05:56.000 --> 00:05:57.680 but when you refilled your prescriptions, what 00:05:57.680 --> 00:05:59.720 over -the -counter meds you bought with it. It 00:05:59.720 --> 00:06:02.360 created this incredibly detailed profile on tens 00:06:02.360 --> 00:06:04.300 of millions of Americans. Which laid the groundwork 00:06:04.300 --> 00:06:06.439 for a lot of what was to come. A lot of what 00:06:06.439 --> 00:06:08.800 was to come. Both good and, as we'll see, pretty 00:06:08.800 --> 00:06:10.980 controversial. The buying didn't stop, of course. 00:06:11.240 --> 00:06:14.220 They bought Statlander Pharmacy in 2000 for their 00:06:14.220 --> 00:06:16.600 specialty division. And then a huge one in 2004, 00:06:16.839 --> 00:06:20.079 1 ,268 Eckerd drugstores. That one pushed them 00:06:20.079 --> 00:06:22.500 into Texas and Florida, right? Yeah. Yep. High 00:06:22.500 --> 00:06:25.379 growth markets. So by the mid 2000s, they were 00:06:25.379 --> 00:06:27.959 a retail giant. But they were about to have this 00:06:27.959 --> 00:06:30.620 realization that the real power in health care 00:06:30.620 --> 00:06:33.220 wasn't just in selling the drug. It was in controlling 00:06:33.220 --> 00:06:35.699 the system that pays for the drug. Exactly. And 00:06:35.699 --> 00:06:37.360 that's where the story takes a dramatic turn. 00:06:37.800 --> 00:06:40.459 Away from retail and toward vertical integration. 00:06:40.980 --> 00:06:44.240 OK, so part one establishes CVS as this massive 00:06:44.240 --> 00:06:48.199 coast to coast retail chain. The move that really 00:06:48.199 --> 00:06:52.360 created the $372 billion company we see today, 00:06:52.579 --> 00:06:55.600 it wasn't about buying more stores. No, it was 00:06:55.600 --> 00:06:57.540 about buying the middleman. The pharmacy benefit 00:06:57.540 --> 00:07:01.279 manager, the PBM. Right. And CVS had been dipping 00:07:01.279 --> 00:07:02.720 their toes in this for a while. They launched 00:07:02.720 --> 00:07:05.100 their own PBM called Pharmacare way back in 1994. 00:07:05.620 --> 00:07:07.360 Just a small operation? Yeah, it was more of 00:07:07.360 --> 00:07:09.399 a strategic test. But the moment that changed 00:07:09.399 --> 00:07:12.290 everything was 2007. The merger with Caremark 00:07:12.290 --> 00:07:15.870 Rx. A colossal merger. It created CVS Caremark 00:07:15.870 --> 00:07:18.750 and it fundamentally altered the entire U .S. 00:07:18.750 --> 00:07:20.750 health care landscape. OK, so we have to break 00:07:20.750 --> 00:07:23.910 this down because this merger is really the engine 00:07:23.910 --> 00:07:25.750 of the whole company, right? It's where the money 00:07:25.750 --> 00:07:27.310 comes from, but it's also where a lot of the 00:07:27.310 --> 00:07:30.389 controversy comes from. It is. By joining the 00:07:30.389 --> 00:07:35.089 massive retailer CVS with the powerful PVM Caremark, 00:07:35.310 --> 00:07:38.189 the new company controlled two critical links 00:07:38.189 --> 00:07:40.259 in the chain. The place where you buy the drug 00:07:40.259 --> 00:07:42.800 and the system that manages the payment for it. 00:07:42.899 --> 00:07:46.379 Exactly. They now control not just where you 00:07:46.379 --> 00:07:49.060 fill your prescription, but the entire mechanism 00:07:49.060 --> 00:07:51.680 for how your insurance plan decides which drugs 00:07:51.680 --> 00:07:54.079 it's going to cover and at what price. So how 00:07:54.079 --> 00:07:56.600 does the PBM actually do that? How does it create 00:07:56.600 --> 00:07:59.180 this internal profit machine? It's all about 00:07:59.180 --> 00:08:01.519 something called formulary management and rebate 00:08:01.519 --> 00:08:04.589 negotiation. The formulary is just the list of 00:08:04.589 --> 00:08:06.850 drugs your insurance plan will cover. Caremark 00:08:06.850 --> 00:08:09.990 goes to the big drug manufacturers and negotiates 00:08:09.990 --> 00:08:12.670 massive rebates. We're talking billions of dollars 00:08:12.670 --> 00:08:15.850 in exchange for giving a specific drug preferential 00:08:15.850 --> 00:08:18.910 treatment on that list. So they get paid by Pfizer, 00:08:19.029 --> 00:08:20.990 for example, to make sure Lipidor is on the list 00:08:20.990 --> 00:08:23.910 instead of a competitor's drug. Precisely. They 00:08:23.910 --> 00:08:26.189 then pass some of that rebate back to the health 00:08:26.189 --> 00:08:28.870 plan, but they often keep a significant chunk 00:08:28.870 --> 00:08:31.930 for themselves. That's called the spread. So 00:08:31.930 --> 00:08:34.190 if they're managing the formulary for tens of 00:08:34.190 --> 00:08:37.129 millions of people, they can steer patients toward 00:08:37.129 --> 00:08:40.129 the drugs where they, care mark, get the biggest 00:08:40.129 --> 00:08:42.870 kickback. Even if that drug isn't the cheapest 00:08:42.870 --> 00:08:44.990 or maybe even the most effective option. That 00:08:44.990 --> 00:08:47.250 feels like a huge conflict of interest. It's 00:08:47.250 --> 00:08:49.809 baked right into the PBM model. They can influence 00:08:49.809 --> 00:08:51.990 the doctor. by controlling what's covered, and 00:08:51.990 --> 00:08:53.929 the pharmacist by controlling reimbursement rates. 00:08:54.129 --> 00:08:56.029 And because of the vertical integration, the 00:08:56.029 --> 00:08:59.629 retail pharmacy feeds the PBM, and the PBM steers 00:08:59.629 --> 00:09:02.029 business right back to the retail pharmacy. It's 00:09:02.029 --> 00:09:05.149 a closed loop, a very, very lucrative closed 00:09:05.149 --> 00:09:07.889 loop. And this new identity as a healthcare giant 00:09:07.889 --> 00:09:10.870 prompted a really public, really strategic move 00:09:10.870 --> 00:09:13.679 in 2014. The tobacco decision. Right. They stopped 00:09:13.679 --> 00:09:15.960 selling cigarettes. It was a brilliant move from 00:09:15.960 --> 00:09:18.519 a branding perspective. September 2nd, 2014, 00:09:18.960 --> 00:09:21.779 they pull all tobacco products from all 7 ,700 00:09:21.779 --> 00:09:24.320 locations a month earlier than they had planned. 00:09:24.559 --> 00:09:27.080 The CEO at the time, Larry Merlo, he said something 00:09:27.080 --> 00:09:29.720 like, cigarettes and health care just don't go 00:09:29.720 --> 00:09:32.679 together. Which sounds purely ethical. It was 00:09:32.679 --> 00:09:35.190 a good thing to do. But it was also incredibly 00:09:35.190 --> 00:09:37.730 strategic. Because it came right before their 00:09:37.730 --> 00:09:39.850 biggest push into health care services. It was 00:09:39.850 --> 00:09:42.590 essential. It cleaned up their image. It helped 00:09:42.590 --> 00:09:45.029 establish the CVS brand as a legitimate health 00:09:45.029 --> 00:09:47.450 care company, not just a convenience store that 00:09:47.450 --> 00:09:50.110 happens to have a pharmacy in the back. And right 00:09:50.110 --> 00:09:52.929 after the ban, they officially changed the corporate 00:09:52.929 --> 00:09:57.110 name from CVS Caremark to CVS Health. Signaling 00:09:57.110 --> 00:09:59.090 the new direction. The new direction. That the 00:09:59.090 --> 00:10:02.169 future, the big money, was in services, not in 00:10:02.169 --> 00:10:04.419 selling candy in magazines. Which brings us to 00:10:04.419 --> 00:10:06.899 the final piece of the puzzle, the ultimate integration, 00:10:07.240 --> 00:10:11.440 Aetna. The capstone. In December 2017, they announced 00:10:11.440 --> 00:10:13.860 the deal to buy Aetna for roughly $69 billion. 00:10:14.299 --> 00:10:16.720 And this was just, it was unprecedented. They 00:10:16.720 --> 00:10:18.379 weren't just buying more pharmacies. They were 00:10:18.379 --> 00:10:21.519 buying the system that pays for everything. Everything. 00:10:21.519 --> 00:10:24.220 Before Aetna. They controlled the drug benefits 00:10:24.220 --> 00:10:26.980 through Caremark. With Aetna, they got the whole 00:10:26.980 --> 00:10:29.700 insurance mechanism, medical, dental, behavioral 00:10:29.700 --> 00:10:32.759 health plans, everything for Aetna's 22 million 00:10:32.759 --> 00:10:36.220 members. So now if you're an Aetna member, your 00:10:36.220 --> 00:10:38.779 prescriptions are processed by Caremark and you 00:10:38.779 --> 00:10:42.500 are, let's say, strongly encouraged to fill them 00:10:42.500 --> 00:10:44.960 at a CVS. You are. They can keep all the profit 00:10:44.960 --> 00:10:47.009 streams internal. They get the insurance premium 00:10:47.009 --> 00:10:49.529 from you, they get the PBM spread from the drug 00:10:49.529 --> 00:10:51.549 company, and they get the retail profit from 00:10:51.549 --> 00:10:53.409 the sale. The whole system is designed to keep 00:10:53.409 --> 00:10:55.909 every dollar inside the company. And you can 00:10:55.909 --> 00:10:58.809 see this strategy change the actual stores almost 00:10:58.809 --> 00:11:01.450 immediately. Oh, yeah. After the merger, stores 00:11:01.450 --> 00:11:03.789 started these massive renovations to focus more 00:11:03.789 --> 00:11:06.470 on health services and less on traditional retail. 00:11:06.690 --> 00:11:08.529 And that's where the Health Hub idea comes from. 00:11:08.669 --> 00:11:11.269 That's the genesis. It launched in Houston in 00:11:11.269 --> 00:11:14.230 2019. And the plan was super ambitious. They 00:11:14.230 --> 00:11:17.450 wanted 1500 health hubs by the end of 2021. The 00:11:17.450 --> 00:11:19.490 pandemic slowed that down, obviously. So what's 00:11:19.490 --> 00:11:21.730 the real difference? If I walk into a health 00:11:21.730 --> 00:11:24.429 hub versus a regular CVS? It's a totally different 00:11:24.429 --> 00:11:27.230 layout and staff. At least a fifth of the floor 00:11:27.230 --> 00:11:30.470 space is dedicated to services. You'll see rooms 00:11:30.470 --> 00:11:32.809 for health screenings, areas for managing chronic 00:11:32.809 --> 00:11:35.889 conditions like diabetes, more medical equipment, 00:11:36.070 --> 00:11:38.970 and a much bigger, minute clinic space. So they're 00:11:38.970 --> 00:11:41.230 literally ripping out aisles of greeting cards 00:11:41.230 --> 00:11:43.409 and seasonal candy to make room for clinical 00:11:43.409 --> 00:11:45.490 care. That's exactly what they're doing, and 00:11:45.490 --> 00:11:47.740 they're staffing up for it. Health hubs have 00:11:47.740 --> 00:11:50.120 care concierges to help you navigate services. 00:11:50.519 --> 00:11:52.940 The Minute Clinic has more support staff medical 00:11:52.940 --> 00:11:56.120 assistants, RNS, to help the nurse practitioners 00:11:56.120 --> 00:11:58.539 and physician assistants. They're turning the 00:11:58.539 --> 00:12:00.899 corner drugstore into a front door for primary 00:12:00.899 --> 00:12:03.379 care. That's the goal. Make the most of that 00:12:03.379 --> 00:12:05.139 incredible physical footprint we talked about 00:12:05.139 --> 00:12:07.100 earlier. So we have the big three care mark, 00:12:07.360 --> 00:12:10.340 Aetna, and the retail pharmacies. But to really 00:12:10.340 --> 00:12:13.440 get the full picture of CVS Health, You have 00:12:13.440 --> 00:12:15.919 to look at all the other subsidiaries, all these 00:12:15.919 --> 00:12:18.120 specialized companies they've acquired to make 00:12:18.120 --> 00:12:20.679 their model, you know, almost bulletproof. Yeah, 00:12:20.720 --> 00:12:23.279 when you connect all the dots, you see this ecosystem 00:12:23.279 --> 00:12:25.960 that lets them manage and monetize a patient's 00:12:25.960 --> 00:12:29.190 entire journey from start to finish. OK, so let's 00:12:29.190 --> 00:12:32.169 start with the one everyone knows, CVS Pharmacy. 00:12:32.289 --> 00:12:36.570 It's just massive. 9 ,600 stores, all 50 states, 00:12:36.750 --> 00:12:40.669 D .C., Puerto Rico. The scale alone gives them 00:12:40.669 --> 00:12:44.240 incredible power. And the reach is... It's just 00:12:44.240 --> 00:12:46.460 unavoidable. They fill more than one out of every 00:12:46.460 --> 00:12:48.919 five prescriptions written in the United States. 00:12:49.080 --> 00:12:51.159 And 85 percent of the U .S. population lives 00:12:51.159 --> 00:12:54.299 within 10 miles of a CVS. It's a piece of the 00:12:54.299 --> 00:12:56.940 American landscape. OK, next up, the engine of 00:12:56.940 --> 00:13:00.519 the whole thing. CVS Caremark, the PBM. We know 00:13:00.519 --> 00:13:03.059 its job is managing benefits, but the scale is 00:13:03.059 --> 00:13:05.440 what's important here. Caremark manages prescription 00:13:05.440 --> 00:13:08.860 dispensing for more than 75 million people. 75 00:13:08.860 --> 00:13:11.779 million. It does everything. Plan design, formulary 00:13:11.779 --> 00:13:14.340 management, claims processing, mail orders, specialty 00:13:14.340 --> 00:13:17.039 drugs. And here's the key part. It doesn't just 00:13:17.039 --> 00:13:19.700 do this through CVS stores. Right. It has a network 00:13:19.700 --> 00:13:23.980 of over 68 ,000 retail pharmacies, chains, independents. 00:13:24.019 --> 00:13:25.659 So even if you go to your local neighborhood 00:13:25.659 --> 00:13:27.759 pharmacy, chances are your payment is still being 00:13:27.759 --> 00:13:29.419 run through the Caremark system. They get a piece 00:13:29.419 --> 00:13:30.840 of the action no matter where you go. Pretty 00:13:30.840 --> 00:13:32.960 much. And then the third pillar, Aetna, is the 00:13:32.960 --> 00:13:35.279 one that pays the bills. Aetna provides the funding. 00:13:35.629 --> 00:13:39.289 Medical, dental, pharmaceutical insurance. The 00:13:39.289 --> 00:13:42.230 huge strategic advantage is that if you are both 00:13:42.230 --> 00:13:45.470 the insurer and the PBM, You don't have to negotiate 00:13:45.470 --> 00:13:48.850 with anyone. You set the prices internally. The 00:13:48.850 --> 00:13:51.149 profit margins are all yours. Total control. 00:13:51.450 --> 00:13:53.649 Total control. And then the front door for a 00:13:53.649 --> 00:13:56.169 lot of people for simple things is Minute Clinic. 00:13:56.509 --> 00:13:58.669 The walk -in clinic inside the store. It's the 00:13:58.669 --> 00:14:00.610 lowest cost way for them to get you into their 00:14:00.610 --> 00:14:02.590 system. Yeah. It's the biggest walk -in clinic 00:14:02.590 --> 00:14:06.029 chain in the U .S., over 1 ,100 locations. Again, 00:14:06.230 --> 00:14:09.070 super accessible. Half the population lives within 00:14:09.070 --> 00:14:11.669 10 miles of one. And it's for, you know, minor 00:14:11.669 --> 00:14:14.370 stuff, vaccinations, strip tests, things you 00:14:14.370 --> 00:14:16.169 don't want to go to a doctor's office or an expensive 00:14:16.169 --> 00:14:18.429 urgent care for. Exactly. It's a feeder system. 00:14:18.970 --> 00:14:21.110 But beyond those main consumer parts, they have 00:14:21.110 --> 00:14:23.230 these highly specialized divisions for the really 00:14:23.230 --> 00:14:25.690 complex, really expensive conditions, which is 00:14:25.690 --> 00:14:27.049 where the biggest profits are in health care. 00:14:27.149 --> 00:14:29.429 And that's where CVS Specialty comes in. Right. 00:14:29.490 --> 00:14:31.210 This is the largest specialty pharmacy in the 00:14:31.210 --> 00:14:34.500 U .S. It handles the incredibly complex and expensive 00:14:34.500 --> 00:14:37.320 drugs for things like cancer, rheumatoid arthritis, 00:14:37.720 --> 00:14:41.159 genetic diseases. And these specialty drugs are 00:14:41.159 --> 00:14:44.460 a huge chunk of all drug spending, right? A hugely 00:14:44.460 --> 00:14:46.879 disproportionate amount. So by controlling this 00:14:46.879 --> 00:14:48.940 segment, CVS Health makes sure all that high 00:14:48.940 --> 00:14:51.259 margin business stays inside their system. What 00:14:51.259 --> 00:14:53.559 about patients who need care at home, like IV 00:14:53.559 --> 00:14:56.419 infusions? That's Quorum. They acquired Quorum 00:14:56.419 --> 00:14:59.779 in 2014. It provides home infusion services to 00:14:59.779 --> 00:15:03.500 about 140 ,000 patients a year. And the synergy 00:15:03.500 --> 00:15:06.399 is brilliant. How so? Aetna, the insurer, can 00:15:06.399 --> 00:15:08.279 say, we're not going to pay for this expensive 00:15:08.279 --> 00:15:10.340 infusion in a hospital. You have to get it at 00:15:10.340 --> 00:15:13.019 home from our company, Quorum. They lower their 00:15:13.019 --> 00:15:16.320 costs and keep the profit, all under the CVS 00:15:16.320 --> 00:15:18.139 health umbrella. And they're also deep inside 00:15:18.139 --> 00:15:21.039 places like nursing homes. That's Omnicare. which 00:15:21.039 --> 00:15:23.759 they bought in 2015. Omnicare is the pharmacy 00:15:23.759 --> 00:15:25.840 service provider for thousands of skilled nursing 00:15:25.840 --> 00:15:28.440 and assisted living facilities, so they manage 00:15:28.440 --> 00:15:30.559 drug access for one of the most complex patient 00:15:30.559 --> 00:15:32.980 populations out there. It's an incredible network, 00:15:33.139 --> 00:15:34.879 and their latest moves show they're not done 00:15:34.879 --> 00:15:36.700 building, they're going after primary care now. 00:15:36.879 --> 00:15:39.399 This is their future. They want to control health 00:15:39.399 --> 00:15:43.279 care from the very beginning. In 2022, they bought 00:15:43.279 --> 00:15:45.519 Signify Health for about $8 billion. billion. 00:15:45.639 --> 00:15:48.919 What does Signify do? They specialize in in -home 00:15:48.919 --> 00:15:51.860 health evaluations, trying to manage care before 00:15:51.860 --> 00:15:54.419 people get really sick. And then the huge one 00:15:54.419 --> 00:15:58.419 in 2023, Oak Street Health. For $10 .6 billion. 00:15:59.259 --> 00:16:02.799 This is a monumental move. Oak Street Health 00:16:02.799 --> 00:16:05.600 is a network of primary care centers that focuses 00:16:05.600 --> 00:16:08.379 on Medicare patients. This tells you that CVS 00:16:08.379 --> 00:16:10.159 Health doesn't just want to fill your prescriptions 00:16:10.159 --> 00:16:12.220 anymore. They want to be your doctor. They want 00:16:12.220 --> 00:16:14.039 to be your primary medical home. They want to 00:16:14.039 --> 00:16:16.139 manage your health from the yearly checkup all 00:16:16.139 --> 00:16:18.059 the way through your cancer treatment and insurance 00:16:18.059 --> 00:16:20.799 claims. And all the while, the retail stores 00:16:20.799 --> 00:16:23.320 are still there, pumping out foot traffic and, 00:16:23.460 --> 00:16:26.299 more importantly, data. That's the secret sauce. 00:16:26.600 --> 00:16:29.019 The retail side isn't just about selling toothpaste. 00:16:29.399 --> 00:16:31.919 It's about that massive data pipeline from the 00:16:31.919 --> 00:16:34.500 extra care card, which they now monetize through 00:16:34.500 --> 00:16:37.940 the CVS Media Exchange or CMX. It lets them sell 00:16:37.940 --> 00:16:40.000 targeted advertising with surgical precision. 00:16:40.320 --> 00:16:42.580 It's just another revenue stream built on top 00:16:42.580 --> 00:16:44.879 of the whole structure. So we've laid out the 00:16:44.879 --> 00:16:47.639 scale, the structure of CVS Health, but that 00:16:47.639 --> 00:16:50.259 integration, especially with the PBM, has put 00:16:50.259 --> 00:16:52.559 the company under just, I mean, constant legal 00:16:52.559 --> 00:16:55.059 and public scrutiny. To really understand this 00:16:55.059 --> 00:16:57.279 company, you have to spend time on the sheer 00:16:57.279 --> 00:16:59.980 volume of these issues. You do. And it's critical 00:16:59.980 --> 00:17:02.179 to see that the very thing that makes the PBM 00:17:02.179 --> 00:17:05.799 so profitable, these complex, secret negotiations 00:17:05.799 --> 00:17:08.579 over drug costs, is what repeatedly gets them 00:17:08.579 --> 00:17:10.799 into trouble for fraud and deceptive practices. 00:17:11.160 --> 00:17:13.029 Let's start at the beginning of the PBM. era. 00:17:13.170 --> 00:17:16.009 Even before CVS bought them, Caremark had a history 00:17:16.009 --> 00:17:18.470 of scandals, right? Oh, yeah. Back in the late 00:17:18.470 --> 00:17:21.089 80s and early 90s, Caremark was involved in multiple 00:17:21.089 --> 00:17:23.569 health fraud and Medicare fraud scandals. With 00:17:23.569 --> 00:17:26.210 the government. Yes. And it resulted in settlements 00:17:26.210 --> 00:17:30.130 costing the company more than $250 million. So 00:17:30.130 --> 00:17:32.049 this pattern of regulatory trouble was there 00:17:32.049 --> 00:17:33.990 from the very start. And that trouble followed 00:17:33.990 --> 00:17:36.750 them, leading to a huge settlement in 2005 over 00:17:36.750 --> 00:17:39.009 pharmaceutical kickback. Right. Caremark paid 00:17:39.009 --> 00:17:42.390 $137 .5 million to settle federal... lawsuits. 00:17:42.690 --> 00:17:44.730 The allegation was that a company they had just 00:17:44.730 --> 00:17:47.829 bought, Advance PCS, was taking kickbacks from 00:17:47.829 --> 00:17:50.049 drug makers. So basically, they were getting 00:17:50.049 --> 00:17:53.470 paid to push certain drugs over others. Exactly. 00:17:53.470 --> 00:17:55.950 To promote their products, even over cheaper 00:17:55.950 --> 00:17:58.509 generics, in government programs like Medicare. 00:17:59.190 --> 00:18:01.990 The decision about which drug you get was being 00:18:01.990 --> 00:18:04.710 influenced by a corporate payment, not just what 00:18:04.710 --> 00:18:07.150 was best for you or what was cheapest. And while 00:18:07.150 --> 00:18:10.150 they didn't admit they did anything wrong, $137 00:18:10.150 --> 00:18:14.490 .5 million settlement tells you how serious the 00:18:14.490 --> 00:18:16.950 government thought it was. This same pattern 00:18:16.950 --> 00:18:20.009 led to another big lawsuit in 2008, the one for 00:18:20.009 --> 00:18:22.829 deceptive practices. This one was so revealing. 00:18:22.869 --> 00:18:25.089 It was a multi -state lawsuit, and they settled 00:18:25.089 --> 00:18:29.000 for $38 .5 million. It really exposed the mechanics 00:18:29.000 --> 00:18:31.380 of how Caremark was profiting from something 00:18:31.380 --> 00:18:34.019 called drug switching. What's that? Attorneys 00:18:34.019 --> 00:18:36.140 general from 28 states alleged that Caremark 00:18:36.140 --> 00:18:38.700 was telling doctors to switch patients to certain 00:18:38.700 --> 00:18:41.259 brand -name drugs, and they were marketing it 00:18:41.259 --> 00:18:43.440 as a way to save the patient or the health plan 00:18:43.440 --> 00:18:45.980 money. But that wasn't actually true. Not always. 00:18:46.259 --> 00:18:48.759 The investigation found that the switch often 00:18:48.759 --> 00:18:51.859 led to tiny savings, or sometimes it even increased 00:18:51.859 --> 00:18:54.819 the cost. But the real winner was always Caremark. 00:18:55.279 --> 00:18:57.079 Because they were steering business to the drug 00:18:57.079 --> 00:18:59.240 companies that gave them the biggest rebates. 00:18:59.440 --> 00:19:01.960 The patient was just a pawn in the middle. A 00:19:01.960 --> 00:19:04.500 pawn in a revenue game. The settlement was a 00:19:04.500 --> 00:19:06.839 big deal, though. It put some real guardrails 00:19:06.839 --> 00:19:09.619 in place. What kind of guardrails? CVS was explicitly 00:19:09.619 --> 00:19:12.079 banned from telling a doctor to switch a drug 00:19:12.079 --> 00:19:15.160 if it would cost the patient more. And they couldn't 00:19:15.160 --> 00:19:17.160 suggest a switch if the original drug's patent 00:19:17.160 --> 00:19:19.700 was about to expire, which was a classic trick 00:19:19.700 --> 00:19:21.900 to squeeze the last bit of profit out of a brand 00:19:21.900 --> 00:19:25.230 name before a cheap generic hit the market. And 00:19:25.230 --> 00:19:27.490 beyond the financial issues, there's this recurring 00:19:27.490 --> 00:19:30.430 problem with how CVS Health handles patient data. 00:19:30.710 --> 00:19:32.829 It's the most sensitive information they have, 00:19:32.970 --> 00:19:35.069 and they have repeatedly gotten in trouble for 00:19:35.069 --> 00:19:37.410 it. The first big public blowup was way back 00:19:37.410 --> 00:19:40.869 in 1998 with the Alensis incident. A real wake 00:19:40.869 --> 00:19:44.230 -up call. CVS was caught sharing specific prescription 00:19:44.230 --> 00:19:47.410 information with a marketing company called Alensis. 00:19:47.609 --> 00:19:49.849 What was Alensis doing with it? They were using 00:19:49.849 --> 00:19:52.089 it to send targeted mailings to people's homes. 00:19:52.509 --> 00:19:54.490 You know, time to refill your heart medication 00:19:54.490 --> 00:19:57.990 or promoting related products. People were outraged. 00:19:58.029 --> 00:20:00.549 I remember the editor of a major medical journal 00:20:00.549 --> 00:20:03.650 called it a gross invasion of privacy. The medical 00:20:03.650 --> 00:20:06.950 community was furious that this intimate health 00:20:06.950 --> 00:20:09.490 data was being used for marketing without any 00:20:09.490 --> 00:20:11.789 real consent. So what happened? After a huge 00:20:11.789 --> 00:20:16.559 backlash, CVS cut ties with lenses. They didn't 00:20:16.559 --> 00:20:18.519 stop the practice. They just brought the whole 00:20:18.519 --> 00:20:21.519 targeted mailing program in -house. So they kept 00:20:21.519 --> 00:20:23.619 using the data. They just controlled it themselves. 00:20:23.960 --> 00:20:25.960 Exactly. And this problem of protecting data 00:20:25.960 --> 00:20:29.660 came up again big time in 2009. They settled 00:20:29.660 --> 00:20:31.900 huge charges with both the Federal Trade Commission 00:20:31.900 --> 00:20:34.079 and the Department of Health and Human Services. 00:20:34.279 --> 00:20:37.140 The FTC and HHS. The FTC said they failed to 00:20:37.140 --> 00:20:39.519 protect sensitive customer and employee information. 00:20:40.250 --> 00:20:44.789 And they paid HHS $2 .25 million for violating 00:20:44.789 --> 00:20:48.109 the big health privacy law. It just showed a 00:20:48.109 --> 00:20:50.329 pattern of failing to meet the standard required 00:20:50.329 --> 00:20:52.369 when you handle this kind of information at such 00:20:52.369 --> 00:20:55.190 a massive scale. But of all the controversies, 00:20:55.190 --> 00:20:57.130 I think the ones related to the opioid crisis 00:20:57.130 --> 00:20:59.450 represent the biggest challenge to their image 00:20:59.450 --> 00:21:01.089 as a health care company. Some of the details 00:21:01.089 --> 00:21:04.490 are just they're damning. The DEA investigation 00:21:04.490 --> 00:21:08.700 in 2011 in that one small town in Florida. Sanford, 00:21:08.700 --> 00:21:12.400 population 53 ,000. The DEA found that the CVS 00:21:12.400 --> 00:21:15.299 pharmacies there were ordering enough painkillers 00:21:15.299 --> 00:21:17.779 to supply a city eight times its size. Eight 00:21:17.779 --> 00:21:20.380 times? Around 400 ,000 people. The volume should 00:21:20.380 --> 00:21:22.259 have been a massive red flag. Just break down 00:21:22.259 --> 00:21:25.059 the numbers on that one store. One single CVS 00:21:25.059 --> 00:21:28.099 in Sanford ordered 1 .8 million oxycodone pills 00:21:28.099 --> 00:21:31.559 in one year. 1 .8 million? That's almost 138 00:21:31.559 --> 00:21:34.160 ,000 pills a month. The average for other pharmacies 00:21:34.160 --> 00:21:36.920 in Florida was around 5 ,300 a month. It's just 00:21:36.920 --> 00:21:38.920 an astronomical difference. It screams diversion. 00:21:39.299 --> 00:21:41.099 And the investigators saw it happening with their 00:21:41.099 --> 00:21:44.200 own eyes. They did. They noted that about every 00:21:44.200 --> 00:21:46.900 third car in the drive -thru was picking up a 00:21:46.900 --> 00:21:50.039 prescription for oxycodone or hydrocodone. And 00:21:50.039 --> 00:21:52.019 pharmacists admitted that customers were coming 00:21:52.019 --> 00:21:54.839 in using street slang for the drugs. Clear signs 00:21:54.839 --> 00:21:57.359 they were being sold illegally. And this lack 00:21:57.359 --> 00:22:00.000 of oversight wasn't just in Florida. Massachusetts 00:22:00.000 --> 00:22:04.039 settled with them in 2016. For almost $800 ,000. 00:22:04.559 --> 00:22:07.039 That settlement was about them failing to give 00:22:07.039 --> 00:22:09.039 their pharmacists access to the state's prescription 00:22:09.039 --> 00:22:11.940 monitoring program, the PMP. The database that's 00:22:11.940 --> 00:22:13.579 supposed to stop people from doctor shopping 00:22:13.579 --> 00:22:16.220 for pills. Right. By not checking it, they were 00:22:16.220 --> 00:22:18.220 just fueling the crisis, filling prescriptions 00:22:18.220 --> 00:22:19.839 without doing the basic due diligence required. 00:22:20.180 --> 00:22:22.559 But the real legal earthquake was the federal 00:22:22.559 --> 00:22:26.279 jury verdict in Ohio. November 2021. A federal 00:22:26.279 --> 00:22:29.039 jury found CVS, along with Walgreens and Walmart, 00:22:29.279 --> 00:22:31.759 liable for helping to create the opioid crisis 00:22:31.759 --> 00:22:34.680 in two Ohio counties. And this is a huge deal 00:22:34.680 --> 00:22:36.720 because it was the first time the pharmacy companies 00:22:36.720 --> 00:22:38.579 themselves were held accountable in a trial. 00:22:38.700 --> 00:22:40.880 So what was the legal argument? What did the 00:22:40.880 --> 00:22:43.440 jury decide was their failure? The argument was 00:22:43.440 --> 00:22:47.210 their failure to monitor. The law says pharmacies 00:22:47.210 --> 00:22:49.089 have a responsibility to make sure prescriptions 00:22:49.089 --> 00:22:51.630 are for a legitimate medical purpose. They're 00:22:51.630 --> 00:22:53.710 supposed to flag and stop suspicious orders, 00:22:53.869 --> 00:22:56.690 ones that are too big, too frequent, too many 00:22:56.690 --> 00:23:00.190 cash payments. The jury decided that CVS's systems 00:23:00.190 --> 00:23:02.730 completely failed to do this, and that failure 00:23:02.730 --> 00:23:05.150 allowed the flood of pills to wreck these communities. 00:23:05.789 --> 00:23:08.009 And the financial penalty for that was massive. 00:23:08.150 --> 00:23:11.890 It was. In August 2022, the judge ordered CVS 00:23:11.890 --> 00:23:14.710 and the others to pay $650 million in damages 00:23:14.710 --> 00:23:18.089 just for that one lawsuit. It set this huge precedent 00:23:18.089 --> 00:23:20.789 that pharmacies are co -liable for the epidemic. 00:23:20.950 --> 00:23:23.609 It was a game changer. Beyond these huge systemic 00:23:23.609 --> 00:23:26.009 issues, there's also been this steady drumbeat 00:23:26.009 --> 00:23:29.150 of problems with just, you know, basic dispensing 00:23:29.150 --> 00:23:31.210 accuracy. Which is supposed to be the one thing 00:23:31.210 --> 00:23:34.460 a pharmacy never gets wrong. In 2005, an investigation 00:23:34.460 --> 00:23:37.400 in Boston found 62 different errors or quality 00:23:37.400 --> 00:23:40.000 problems over a few years. It was so bad the 00:23:40.000 --> 00:23:41.920 state had to bring in a nonprofit to monitor 00:23:41.920 --> 00:23:44.059 them for two years. And they've also got into 00:23:44.059 --> 00:23:46.339 trouble for what they sell on their retail shelves. 00:23:46.640 --> 00:23:49.480 Right. In 2018, the Center for Inquiry sued them 00:23:49.480 --> 00:23:52.559 for consumer fraud over selling homeopathic medicines. 00:23:52.880 --> 00:23:54.799 The argument being that these products don't 00:23:54.799 --> 00:23:56.740 actually do anything. And that by putting them 00:23:56.740 --> 00:23:59.380 on the shelf next to real medicine, CVS gives 00:23:59.380 --> 00:24:02.200 them a credibility they don't deserve. The lawsuit 00:24:02.200 --> 00:24:04.339 argued it was dangerous because people might 00:24:04.339 --> 00:24:06.220 choose these ineffective treatments instead of 00:24:06.220 --> 00:24:08.500 getting real medical care, which could make them 00:24:08.500 --> 00:24:11.660 sicker or even lead to death. It's a real ethical 00:24:11.660 --> 00:24:14.160 question for a company that calls itself health. 00:24:14.759 --> 00:24:18.660 But these errors can have just catastrophic human 00:24:18.660 --> 00:24:21.940 costs. The incident in 2023 was heartbreaking. 00:24:22.220 --> 00:24:24.900 Just a terrible, tragic case of human error. 00:24:25.119 --> 00:24:28.839 A patient, Tamika Thomas, was going through IVF. 00:24:29.119 --> 00:24:31.299 She was supposed to be given medication to help 00:24:31.299 --> 00:24:33.480 her pregnancy. Instead, the pharmacist gave her 00:24:33.480 --> 00:24:36.240 misoprostol. An abortion pill. An abortion pill. 00:24:36.380 --> 00:24:38.400 She lost both of the embryos she had transferred. 00:24:38.460 --> 00:24:41.259 Her quote was just, they just killed my baby. 00:24:41.579 --> 00:24:43.819 It's a devastating reminder of what's at stake. 00:24:43.960 --> 00:24:46.339 And what were the consequences for CVS? The two 00:24:46.339 --> 00:24:48.299 pharmacists were fined and put on probation. 00:24:48.700 --> 00:24:51.799 And CVS Pharmacy, the corporation, got the maximum 00:24:51.799 --> 00:24:56.160 fine. $10 ,000. $10 ,000. Wow. Let's just let's 00:24:56.160 --> 00:24:58.000 also circle back to the pricing issues. They 00:24:58.000 --> 00:25:00.259 were fine for misrepresenting Medicare prices, 00:25:00.339 --> 00:25:02.660 too, weren't they? They were. In 2012, they paid 00:25:02.660 --> 00:25:05.819 five million dollars to settle FTC charges that 00:25:05.819 --> 00:25:08.839 they misrepresented the prices of certain Medicare 00:25:08.839 --> 00:25:11.720 Part D drugs for things like breast cancer and 00:25:11.720 --> 00:25:14.519 epilepsy. Again, it's a breach of trust with 00:25:14.519 --> 00:25:17.319 a really vulnerable population, and it ties right 00:25:17.319 --> 00:25:20.000 back to the PVM's control over pricing. So we've 00:25:20.000 --> 00:25:22.660 gone through the transformation, the model, and 00:25:22.660 --> 00:25:25.319 the decades of controversy. To finish up, let's 00:25:25.319 --> 00:25:27.640 look at where the company is headed now and how 00:25:27.640 --> 00:25:29.720 they try to balance all this power with being 00:25:29.720 --> 00:25:32.279 a good corporate citizen. You can really see 00:25:32.279 --> 00:25:34.000 their strategy in their operational decisions. 00:25:34.400 --> 00:25:36.539 They are all in on the health hub and the Oak 00:25:36.539 --> 00:25:38.559 Street primary care model, and they're moving 00:25:38.559 --> 00:25:40.769 away from just being a retailer. That's behind 00:25:40.769 --> 00:25:43.190 the store closures, right? Exactly. In 2021, 00:25:43.509 --> 00:25:46.349 they announced plans to close 900 stores over 00:25:46.349 --> 00:25:49.049 three years. Which is about 10 percent of all 00:25:49.049 --> 00:25:52.109 their U .S. stores. It's a huge number. But they 00:25:52.109 --> 00:25:54.809 justified it by saying consumer behavior has 00:25:54.809 --> 00:25:57.609 changed and they need to focus on their future 00:25:57.609 --> 00:26:00.049 in health care delivery. They're getting rid 00:26:00.049 --> 00:26:02.690 of underperforming retail locations so they can 00:26:02.690 --> 00:26:04.670 invest that capital into building out more clinical 00:26:04.670 --> 00:26:07.269 spaces. But even as they're closing some stores, 00:26:07.369 --> 00:26:09.289 they're finding new ways to make money off the 00:26:09.289 --> 00:26:12.230 ones that are left and off their website. That's 00:26:12.230 --> 00:26:15.230 where the CVS Media Exchange, CMX, comes in. 00:26:15.329 --> 00:26:17.410 Their advertising network. It's their retail 00:26:17.410 --> 00:26:20.250 media network launched in 2020. It's an increasingly 00:26:20.250 --> 00:26:22.670 common way for big retailers to monetize their 00:26:22.670 --> 00:26:25.450 customer data. They use all that extra care card 00:26:25.450 --> 00:26:27.549 information to let other companies like, you 00:26:27.549 --> 00:26:29.910 know, a cereal brand or a soda company target 00:26:29.910 --> 00:26:32.390 ads with incredible precision on CVS websites 00:26:32.390 --> 00:26:35.250 and apps. Just another high margin revenue stream. 00:26:35.480 --> 00:26:37.779 And despite these changes, the sheer financial 00:26:37.779 --> 00:26:40.539 scale of the company is just, it's still immense. 00:26:40.900 --> 00:26:43.859 The 2024 numbers are still hard to believe. $372 00:26:43.859 --> 00:26:48.019 .8 billion in revenue, $253 .2 billion in assets. 00:26:48.380 --> 00:26:51.099 When a company is that big, their decisions just 00:26:51.099 --> 00:26:53.339 fundamentally impact the cost and delivery of 00:26:53.339 --> 00:26:56.180 health care for everyone. So on the other side 00:26:56.180 --> 00:26:58.960 of the coin, how does the company try to project 00:26:58.960 --> 00:27:01.579 a positive image? What are they doing in terms 00:27:01.579 --> 00:27:04.839 of philanthropy and social commitments? They 00:27:04.839 --> 00:27:07.380 do have some longstanding initiatives. The CVS 00:27:07.380 --> 00:27:10.059 Samaritan Vans, for example, have been providing 00:27:10.059 --> 00:27:13.660 free roadside assistance since 1978. And their 00:27:13.660 --> 00:27:16.339 charity Golf Classic has raised millions for 00:27:16.339 --> 00:27:18.859 nonprofits. And they've responded to consumer 00:27:18.859 --> 00:27:21.500 pressure on issues like animal welfare. They 00:27:21.500 --> 00:27:24.420 have. In 2016, they made a public promise to 00:27:24.420 --> 00:27:27.960 source 100 % cage -free eggs. And to their credit, 00:27:28.059 --> 00:27:30.099 they actually did it ahead of schedule by the 00:27:30.099 --> 00:27:32.839 end of 2022. It shows they can execute on these 00:27:32.839 --> 00:27:34.799 kinds of public promises when they want to. And 00:27:34.799 --> 00:27:37.140 their most recent big commitment is in an interesting 00:27:37.140 --> 00:27:40.440 area, affordable housing. Right. It shows they're 00:27:40.440 --> 00:27:42.059 thinking about the social determinants of health. 00:27:42.240 --> 00:27:45.480 In 2024, they committed almost $35 million to 00:27:45.480 --> 00:27:47.339 help build two affordable housing developments 00:27:47.339 --> 00:27:50.299 in Hawaii. Creating hundreds of new homes. Exactly. 00:27:50.359 --> 00:27:52.960 It's an acknowledgment that a person's health 00:27:52.960 --> 00:27:55.640 is about more than just what happens in a pharmacy 00:27:55.640 --> 00:27:58.900 or a clinic. It's about addressing these bigger 00:27:58.900 --> 00:28:02.359 structural issues. So we've covered this incredible 00:28:02.359 --> 00:28:05.519 journey from a single consumer value store to, 00:28:05.680 --> 00:28:08.160 you know, the second largest healthcare company 00:28:08.160 --> 00:28:10.319 in the world. It's a really powerful story of 00:28:10.319 --> 00:28:13.049 corporate growth. Built on that retail expansion 00:28:13.049 --> 00:28:16.309 in the 90s and then the huge strategic shift 00:28:16.309 --> 00:28:19.109 with the Caremark merger in 2007 and the Aetna 00:28:19.109 --> 00:28:22.170 acquisition in 2017. What's clear is that the 00:28:22.170 --> 00:28:24.269 face of the company is the store, but the engine 00:28:24.269 --> 00:28:27.009 is the PBM. It's the thing that drives the revenue 00:28:27.009 --> 00:28:30.329 and at the same time is the source of all these 00:28:30.329 --> 00:28:32.630 controversies over costs and kickback. Yeah. 00:28:32.730 --> 00:28:34.990 The key takeaway for you is that CVS Health isn't 00:28:34.990 --> 00:28:37.049 just a bunch of different businesses. It's one 00:28:37.049 --> 00:28:39.289 highly centralized system that controls your 00:28:39.289 --> 00:28:42.019 prescription insurance. your drug benefits, your 00:28:42.019 --> 00:28:44.259 local pharmacy, your specialty care. And now 00:28:44.259 --> 00:28:46.180 they're coming for your primary care doctor with 00:28:46.180 --> 00:28:48.319 Oak Street Health. They are. This concentration 00:28:48.319 --> 00:28:51.000 of power just makes them this undeniable force 00:28:51.000 --> 00:28:53.759 that shapes the health care experience for basically 00:28:53.759 --> 00:28:56.140 every American. So we'll leave you with a final 00:28:56.140 --> 00:28:59.440 thought on all this. CVS Health says its mission 00:28:59.440 --> 00:29:01.440 is to improve the future health of Americans. 00:29:01.839 --> 00:29:04.319 But its history is filled with massive settlements 00:29:04.319 --> 00:29:07.900 for deceptive practices and a federal jury literally 00:29:07.900 --> 00:29:10.619 finding them co -responsible for the opioid crisis. 00:29:11.240 --> 00:29:13.839 Can a corporation that controls so much of the 00:29:13.839 --> 00:29:17.000 system and carries that much baggage truly earn 00:29:17.000 --> 00:29:19.039 the public trust it needs to be your primary 00:29:19.039 --> 00:29:21.990 care provider? Think about that tension. That 00:29:21.990 --> 00:29:24.309 conflict between optimizing for profit and being 00:29:24.309 --> 00:29:26.210 a trusted health care partner. Think about it 00:29:26.210 --> 00:29:27.990 the next time you're in a health hub or your 00:29:27.990 --> 00:29:30.130 prescription is run through Caremark or you use 00:29:30.130 --> 00:29:32.650 your Aetna insurance card. That complexity is 00:29:32.650 --> 00:29:35.069 modern American medicine. Until the next E -Dive, 00:29:35.170 --> 00:29:35.769 stay curious.