CVS doesn't want to leave any 'white space' for Amazon to disrupt

  • CEO Larry Merlo said CVS wants to meet customers' needs while not leaving "any white space for Amazon to disrupt."
  • Amazon is acquiring online pharmacy company PillPack for $1 billion.
  • CVS Health is acquiring health insurer Aetna for roughly $69 billion.
Larry Merlo
Cameron Costa | CNBC
Larry Merlo

CVS Health CEO Larry Merlo said he doesn't lie awake at night worrying about Amazon but he does want to make sure he's not leaving any room for disruption.

What Merlo does worry about is how CVS can meet the needs of its customers, he said Monday in an interview with David Rubenstein, president of the Economic Club of Washington, D.C. The company spends a lot of time listening to its customers to understand what they're not happy about and filling their unmet needs, he said.

"So that's what we focus on as an organization, with the goal being: Don't leave any white space for Amazon to disrupt," Merlo said.

Amazon bought its way into the prescription drug delivery business with a $1 billion acquisition of online pharmacy company PillPack. The move spooked Wall Street and shaved about $12.8 billion in market value from drugstores CVS, Walgreens Boots Alliance and Rite Aid.

PillPack sorts a person's medicines into clear pouches with labels explaining what's inside and when the person should take them. Merlo said it's a "very niche product" since it's designed for people with chronic conditions who take multiple drugs every day.

CVS said it offers a similar multi-dose-packaging product that incorporates a proprietary dosing schedule technology.

"We have that capability today," Merlo said. "And listen, with the acquisition of PillPack, there's nothing proprietary about their technology. It's off the shelf."

CVS is trying to become a disruptive force itself with its roughly $69 billion acquisition of health insurer Aetna. With the deal, CVS wants to manage chronic conditions such as diabetes at its MinuteClinics. They also want to steer people into these walk-in clinics and away from more expensive sites such as emergency rooms.

The Department of Justice last week gave the deal preliminary approval. CVS still needs states' approval. Merlo said Monday they're in the "home stretch" of that process.

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