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CVS Health Launches Prescription Delivery Service, Stock Jumps ~5%

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CVS Health announces a prescription delivery service

Today, CVS Health, the leading pharmacy benefit managers, is up ~5% after announcing the launch of its drug delivery service from all of its US locations. The company has nearly 10,000 stores across the United States, and it expects to deliver customer orders within a day or two of customers placing orders on the website or app. The company also plans to offer same-day delivery service in some major cities.

Prescription drug sales for CVS Health comprise ~70% of its total drugstore sales. The company has witnessed declining sales in its general merchandise segment. It aims to generate sales growth through the launch of its delivery service. CVS plans to charge $8.99 for same-day delivery and $4.99 for next-day delivery.

With the aim to remain competitive in the healthcare industry, CVS Healthcare is also acquiring health insurance company Aetna (AET) for $69 billion. On June 13, shares of CVS Health jumped ~3% on the news of the approval of the AT&T (T) and Time Warner (TWX) merger, which was seen as a positive for other vertical merger deals such as CVS-Aetna.

Competitive threat from Amazon led the move to CVS’s drug delivery service

CVS Health moved to gain an advantage over Amazon’s (AMZN) plans to enter into the pharmacy space. As we discussed in Healthcare Plan: Amazon, JPMorgan Chase, and Berkshire Hathaway, the three companies are planning to enter the healthcare market with the aim of lowering healthcare costs for employees. The plans aren’t yet clearly understood, but a competitive threat looms over healthcare players. However, last week, Warren Buffet said in an interview that the companies are likely to announce the name of the CEO of their healthcare joint venture within the next two weeks.

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