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CVS Caremark (CVS - Analyst Report) recently extended its innovative Pharmacy Advisor program to cover five additional chronic conditions, namely asthma, depression, osteoporosis, breast cancer and chronic obstructive pulmonary disease.

These condition-based programs are an interventional measure to inform pharmacists when patients are non-adherent to their medication regimen or have suffered a gap in care. Prior to the extension, CVS’s Pharmacy Advisor was directed at diabetes and cardiovascular conditions, with more than 3.8 million interventions to date.

CVS witnessed an additional uptake in Pharmacy Advisor program in 2012 and the recent extension reflects its high success rate. The extension should further drive adoption rates by increasing the number of lives covered under Pharmacy Advisor. This is likely to increase the profitability of CVS going forward.

The Need for Pharmacy Advisor

According to estimates, medication non-adherence costs the U.S. economy up to $300 billion annually. Studies reveal that low medication adherence is associated with chronic conditions. Further, the incidence of medication persistence (length of time a patient continues to take a prescribed drug) is lower for individuals with chronic diseases.

As per the New England Healthcare Institute, medication adherence programs for individuals can reduce healthcare costs and improve patient outcomes. Further, a study published in the Health Affairs journal suggests that intervention by pharmacists can reduce gaps in care. In light of these facts, the extension of Pharmacy Advisor should improve medication adherence for chronic conditions across the U.S.

Our Rank

The extension of the Pharmacy Advisor is the latest addition to CVS’s several near-term growth drivers. With a favorable selling season, its fourth-quarter and annual results sailed past the corresponding Zacks Consensus Estimates. The company’s forecast for 2013 also encourages market sentiments.

Given this backdrop, the estimate revision trend for CVS reflects a bullish sentiment. Consequently, the stock carries a Zacks Rank #2 (Buy). Besides CVS, ResMed (RMD - Analyst Report), Medical Action and MedAssets Inc (MDAS - Snapshot Report), carrying a Zacks Rank #1 (Strong Buy) are expected to do well.

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