CVS Sees $3B Tech Investment as COVID-19 Vaccine and Testing Set to Plunge

After a year of unprecedented COVID-19-related gains, the nation’s largest pharmacy chain is looking to leverage the new customer connections it made during the pandemic and prepare for a time without the benefit of vaccine and testing foot traffic and revenue.

In announcing its fourth quarter and full year earnings results Wednesday (Feb. 9) for the three months ended Dec. 31, CVS Health said it is planning to spend up to $3 billion on “technology and digital enhancements” to improve the consumer experience and community locations, at a time when its pandemic-related businesses are expected to plunge.

“In 2022, we expect vaccine volumes to decline approximately 70% to 80%, and in-store diagnostic testing volumes to decline by 40% to 50% compared to 2021,” Chief Financial Officer Shawn Guertin told analysts and investors on the company’s fourth quarter earnings call.

In detailing the scale and scope of pandemic-related activity last year, CVS said it conducted more than 32 million tests, administered over 59 million vaccines, and as a result of that activity and traffic, had added roughly 37 million new customers during the pandemic era.

The challenge CVS faces now — alongside its peers and rivals in retail, health insurance and pharmacy categories — is how to keep that large base engaged and coming back, and more often than not, the answer points to increased digital connectivity.

“Our digital capabilities for health interactions such as COVID testing and vaccine, prescription services, and sales of health and wellness products, have dramatically increased consumer engagement across all CVS Health businesses,” CEO Karen Lynch said during the company’s call.

“We now serve 40 million customers digitally, up approximately 10% in the last six months alone,” she added, noting that roughly 14% of new customers that came to CVS Health through COVID-19 testing services went on to fill new prescriptions or receive vaccinations there too.

Digital Drug Store

While many consumers are still cutting down or avoiding in-store shopping altogether, CVS has seen a dramatic increase in visits to its website, as well as the services and convenience it offers. The company reported more than 2 billion visits to its website in 2021, a 55% increase over the prior year.

That strategy appears to have paid off as the Woonsocket, Rhode Island-based company said that total Q4 revenue in its retail segment increased 12.7%.

“We are progressing on optimizing our retail portfolio and pivoting our stores into three formats: primary care clinics, enhanced HealthHUBs and traditional CVS Pharmacy locations,” Lynch said, adding that the retailer is also moving ahead with plans to de-densify stores based on consumer health and buying needs, omnichannel preferences and shifts in the U.S. population.

“Our digital-first approach is focused on delivering a superior experience for consumers by creating a more connected and seamless health journey, and we are making progress towards setting a new standard for digital healthcare for consumers at CVS.com,” Lynch said.