CVS, Competitors Vie for Senior Living Pharmacy Market Share

Pharmacy giant CVS Health (NYSE: CVS) recently announced an aggressive push to serve assisted living providers through its Omnicare arm. But CVS is competing with specialized pharmacies serving the senior living sector—and this could be good news for senior living providers, as it could spur more innovative pharmacy distribution and management practices.

Some assisted living providers, such as Marquis Companies, already offer in-house pharmacy services to their residents, but those providers are not the majority. Two-thirds of assisted living providers which offer ancillary services reported using a third-party pharmacy provider, according to a recent online survey from the American Seniors Housing Association (ASHA).

And a significant proportion of these providers already are working with CVS/Omnicare, which claims a 50% market penetration rate.

Some major industry players see growth opportunities in assisted living communities. For example, CVS—which in 2015 acquired what was then the nation’s largest long-term care pharmacy provider, Omnicare—is looking to improve its presence with assisted and independent living providers in the months ahead.

“Our enterprise product development team is rapidly innovating improved solutions to effectively serve this market and to substantially grow our penetration rate from approximately 50% to 70%,” David Denton, executive vice president and CFO with CVS Health, said during the company’s second-quarter earnings call on Aug. 8. “Our initial solutions have produced success in some markets. And we’re looking to scale those up across our assisted living book of business.”

Omnicare has struggled since the CVS buyout, particularly with regard to its skilled nursing business. The long-term care pharmacy has in recent times grappled with longer collection times on receivables, a faster-than-expected decline in facility reimbursement rates, and lower client retention rates.

“Bed census at skilled nursing facilities continued to track lower, resulting in fewer prescriptions across our platform,” Denton continued during the earnings call. “And, despite a growing opportunity in the assisted living market, our programs to serve these clients have grown more slowly than we originally anticipated.”

To help grow the assisted living side of its business moving forward, CVS is implementing a range of initiatives that include rolling out “assisted living centers of excellence” and investing in new ways to work directly with community managers and their residents.

CVS declined to elaborate on the company’s plans when reached by Senior Housing News.

PharMerica also declined comment when reached by SHN. Owned in part by Walgreens, PharMerica is another large pharmacy provider to the senior living sector.

Large-scale opportunity

Senior living represents a sizable potential market segment for pharmacy providers, according to Cece Credille, senior vice president of quality services at Enlivant, told SHN. Chicago-based Enlivant manages and owns about 240 properties, with more than 10,400 assisted living units.

The company works with Omnicare, along with other pharmacies, to meet its residents’ medication needs.

“It’s primarily private-pay for room and board, and obviously it’s still a lot of Medicare Part D or insurance coverage for the medication, but because it’s congregate living, that should be appealing to these large [pharmacy] providers,” Credille told SHN.

Assisted living isn’t the only potential senior living market for pharmacies, Credille added.

“There’s an opportunity for these pharmacies in independent living, as well,” she explained “That’s a whole other market segment. And you think about how big some of these communities are, I think there’s a lot of opportunity there.”

Like Omnicare and Medication Management Partners, Baltimore-based long-term care pharmacy Remedi SeniorCare also sees the benefit of serving the senior living marketplace.

Remedi currently operates in 30 states and Washington, D.C., and works with about 1,000 long-term care facilities and senior living communities, including Enlivant. About 40% of the pharmacy’s clients are assisted living communities.

“The increase in senior living growth through new development or acquisitions will always represent a growth potential for Remedi,” Libby McDonald senior vice president of account services at Remedi, told SHN. “Our steady, responsible growth focuses on positioning our pharmacies in markets to efficiently service multiple communities in the state and neighboring states.”

Challenges and trends

That senior living pharmacy opportunity won’t come without some challenges, however. For instance, pharmacy providers that are more accustomed to serving skilled nursing facilities will have to make some adjustments, Credille emphasized.

“You can’t drop in the medication system that worked for so long in skilled nursing and still does, it’s just not the same customer relationship with the residents and families,” she said. “The payer source for skilled is all Medicare Part A, so there’s little interface with the customer. The difference in assisted living is the end user who is paying the co-pays, and the ‘donut hole’ is the customer, the resident, or their families.”

Some macro trends, such as the senior living industry moving toward electronic health records (EHRs), will also affect pharmacies that serve the industry, noted McDonald. In particular, changing regulations, provider development and growth, and resident acuity will create new challenges, and new opportunities, for pharmacies.

“Continued collaboration between nursing facilities, [long-term care] pharmacy operators, and EHR providers is necessary to find ways to streamline the communication process, make nurses’ jobs more efficient and reduce opportunities for errors,” McDonald said.

The differences between assisted living and other senior care settings has given rise to some pharmacy companies that focus on the private-pay sector. Crestwood, Illinois-based Medication Management Partners is one example, and CEO Labinot Avdiu believes that this focus gives it a competitive edge.

Medication Management Partners services 5,500 residents in four states from its Illinois headquarters (pictured above). Some of the company’s clients include Chicago-based Pathway to Living and Eden Prairie, Minnesota-based New Perspective Senior Living.

While regulatory constraints and reimbursement pressures are generally a senior living pharmacy’s two biggest challenges, there are also big opportunities in emerging technologies such as telepharmacy and pharmacogenomics—or the ability to provide a customized pharmaceutical care plan based on someone’s genetic makeup—Avdiu said.

Another industry trend to watch in the years ahead is consolidation, he added.

“The world of health care providers is rapidly consolidating, in almost every segment of the health care industry,” he said. “[It’s] hard to predict what will happen in the next decade, but the current trends seem to indicate less players in the future, not more.”

CVS itself is a prime example of this trend. The company is in the midst of trying to tie up with one of the nation’s largest insurance providers, Aetna (NYSE: AET).

And CVS isn’t the only one. Another major pharmacy retailer, Walmart, was rumored to be interested in acquiring a major insurer in Humana (NYSE: HUM). The trend is also playing out at Amazon, which in June acquired pharmacy startup PillPack for just under $1 billion. This has spurred talk that the e-commerce giant wants to reinvent the way that people manage and purchase their medications, with some speculation that drones could soon drop pills onto people’s porches.

But despite all these uncertainties, there may be room for a variety of pharmacy players to flourish in the senior living space, considering demographic trends.

“The population is aging, so the continued growth of the senior living industry is something that most expect will continue,” Medication Management Partners CEO Labinot Avdiu told SHN. “There is good competition and growth in the industry, so in my view, the available market-share is healthy.”

Written by Tim Regan