Game Theory Presentation - CVS & Walgreens

Brannan Millard, Clarence Lee Jr., Lindsey Sin, Srikanth Rao

Top 5 Companies in the Drugstore Industry Segment*
RANK COMPANY MARKET CAP.
1 CVS CAREMARK CORPORATION COMMON
(CVS)
$86.6 BILLION
2 WALGREEN CO. COMMON STOCK (WAG) $63.9 BILLION
3 RITE AID CORPORATION COMMON STOCK
(RAD)
$6.3 BILLION
4 GNC HOLDINGS INC. CLASS A COMMON
STOCK (GNC)
$4.5 BILLION
5 PHARMERICA CORPORATION COMMON
STOCK (PMC)
$741.5 MILLION
CVS Company Details
Strategic Goals:
1) Pharmacy Benefit Management Growth
2) Driving Growth in Retail Pharmacy
3) Continue MinuteClinic Momentum
CVS Company Details
Revenue: $133 Billion projected for
2014 ($2 Billion from tobacco and
tobacco related products)
Healthcare Product Offerings:
Prescription Drugs, Retail-Based
Healthcare Clinics,Contact Lenses
CVS Market Share
1) Total Revenue - $124 Billion for 2013
2) Store Locations - 6,288
3) Pharmacy - approximately 20% market share
($73 Billion net revenue for CVS Pharmacy Seg.)
-increased 24.7% from 2011




Strategic Goals:

Create a Well Experience
Transform the Role of Community Pharmacy
Establish an Efficient Global Platform

Walgreens Company Details
Total Revenue - $73.23 billion*
Store Locations - 8582 nationally
Pharmacy - 19.1% of Prescription Market
Share*
$46 billion of total net revenue is prescription
sales*
Walgreens Company Details

Prescriptions, Clinics, Contact Lenses
Walgreens Company Details:
Health Care Services

A Quick History...
1967: CVS
opens first
store with a
pharmacy
1970s 2000s:
CVS acquires
or purchases
hundreds of
other
pharmacy
stores
2006: CVS
acquires
Minneapolis
based
MinuteClinic
2007: CVS
stops selling
cigarettes in
pharmacies
2014: CVS
stops selling
cigarettes in all
stores
1901: Walgreens
opens first store
in Chicago
1922: Introduced
a malted
milkshake, which
led to it
establishing ice
cream
manufacturing
plants
1950s:
Modernizes by
switching to
barcode scanning
1986: Acquires
the MediMart
chain from Stop &
Shop
2011: Walgreens
acquires
Drugstore.com
Growing Market Share
Aging Population
Affordable Care Act - new
customers (30mill. users by 2015)
Chronic Disease - the U.S.
population suffers from 1 or more
chronic disease
Strategy

Clinical Focus - MinuteClinic
Pri. Care - Rx Plans - Formulary Expansion
American Care Act - Smoker Health Insurance
Premium Increase
2

Distribution Focus - Express Scripts
Global Expansion - Foreign Alliances
Sell Tobacco - Public Educational Programs
1
Brand Image:
Making Healthcare Better

Medicaid
Brand Image:
Corner of Happy and Healthy

Medicare
What will Walgreens do?
Tobacco Market Share

Health Care Market Share
CVS
announces
removing
tobacco
from shelves
by October
2014
Walgreens
announces a
wait-and-see
approach
Compete
Keep Tobacco
(announcement)
Phase out
Tobacco
Drop Tobacco
& Other
Harmful
Products
Do NOT
Compete
Keep tobacco
(no announcement)
Walgreens Decision Tree
ROUND 1 ROUND 2
February 2014 ...shortly after October 2015

Next Steps
SHORT TERM:
Choose not to compete - make no
announcement - keep tobacco
Preserve revenue sales from tobacco
Monitor CVS, health care environment under
American Care Act, tobacco sales
Increase reduced risk products

Next Steps
LONG TERM:
Phase out & eventually drop tobacco
Increase reduced risk products
Focus on aging population
Focus on global expansion