The change agent inside CVS

September 11, 2015, 12:00 PM UTC

As the crow flies, it’s roughly 3,700 miles from the North Pole to the headquarters of CVS Health (CVS) in Woonsocket, R.I., just outside Providence. But on this sweltering summer day inside a plain-looking three-story building on the edge of the CVS corporate campus, Helena Foulkes (Most Powerful Women, No. 14) is having Christmas in July.

The president of CVS/pharmacy, the company’s flagship drugstore chain, is standing in the middle of an aisle packed with holiday paraphernalia—Santa hats, $25 wreaths, plastic Peanuts-branded Christmas trees, boxes of Ferrero Rocher chocolates wrapped in gold foil. There aren’t any shoppers around because she’s not in a real CVS but rather a 10,000-square-foot mock-up store, a living lab of sorts where the retailer tests new product layouts and conducts focus groups with customers.

Today the “store” is set up to show the planned displays for the prime fall shopping season, and Foulkes is walking aisle by aisle with her top merchants to get a sneak peek. “This is a really great way, without PowerPoint, to stand in front of product and look and see and feel,” she says.

Suddenly Foulkes spots something that catches her interest: Christmas stockings that each have one big monogrammed letter on them. “So, what, you have to have every letter in the alphabet?” she asks the buyer in charge of holiday decorations, an executive named Mike McEnany. He explains that, no, in fact there are studies on which monogram letters are the bestsellers, and they vary the mix depending on the store location. “But the key letters are ‘S,’ ‘M,’ ‘J,’ and ‘C,’ ” says McEnany. Then adds, “And ‘H.’ ”

“Of course there’s ‘H’!” says Foulkes triumphantly as she and the half-dozen execs erupt in laughter.

Helena Foulkes of CVS.Photograph by Joe Pugliese for Fortune Magazine

Between moments of levity, Foulkes is using the tour to carefully grade the aggressive makeover that she and her team are in the process of introducing at CVS’s vast fleet of 7,900 stores. She’s delighted to see that her merchants plan to give more prime space to beauty brands promising health benefits, such as Neutrogena and L’Oréal. And at about 500 stores, CVS has begun stocking snacks marketed as “healthy” (such as Kind bars, which have been singled out by the FDA as not living up to the billing) near the cash registers while relegating traditional junk food (like Oreo cookies) to the back.

The changes are aimed at burnishing CVS’s image as a health-oriented company. Over the past decade, CVS has made a series of multi-billion-dollar deals to grab a bigger piece of the growing health care industry pie. In addition to the retail drugstore business, CVS is now the country’s biggest specialty pharmacy; it operates the second largest mail-order-drug service; and, in Caremark, it has the second-biggest pharmacy benefits manager, or PBM, processing prescription-drug programs for big companies and health insurers.

Add it all up, and CVS is now the largest health care–related company in the U.S.  The company ranked No. 10 on the Fortune 500 this year, with $139.4 billion in revenue in 2014—enough to put it ahead of massive drug distributor McKesson (MCK) ($138 billion) and insurer UnitedHealth Group (UNH) ($130.5 billion). To emphasize his company’s evolution, in 2014 CEO Larry Merlo changed the company’s name from CVS Caremark to CVS Health.


A landmark moment in the company’s transformation came early last year when Merlo announced that CVS would cease selling tobacco products by Oct. 1, 2014—a deadline it met nearly a month early. The decision meant sacrificing about $2 billion in sales. Led by Merlo, CVS’s executive team decided that continuing to sell cigarettes had become untenable for a company that was simultaneously trying to sell itself as a health care giant. CVS reaped an immediate public relations windfall from the tobacco exit, earning approving tweets from the White House, former New York mayor Michael Bloomberg, and Bill Gates, among others.

The media attention generated by the tobacco exit also cast a spotlight on Foulkes, 51, who has long been a rising star inside CVS. A cancer survivor and marathoner—as well as a bit of a daredevil who once ran with the bulls in Pamplona—Foulkes has been the architect of customer-engagement programs over the years that have been key to CVS’s growth. Rhode Island Gov. Gina Raimondo, a good friend, calls Foulkes a “get-things-done person.” (For more on Raimondo, read “This governor is worth keeping tabs on” from this issue.)

At the time of the tobacco announcement, Foulkes had just made the switch from chief of strategy and government affairs (where she describes herself as “a catalyst” for making the decision to drop tobacco products “but not the only one”) to running retail, which meant that the lost cigarette sales would come out of her P&L. “I remember somebody saying to me, ‘So now do you think it’s a good idea?’ ” she says, laughing. Foulkes did, and she embraced the role of being a spokesperson for the move. (And it was personal as well as business for Foulkes: Her mom died of lung cancer in 2009.) In her office, Foulkes has a framed picture of herself with First Lady Michelle Obama from an event honoring CVS’s tobacco exit.

Signage promoting quitting smoking in a space that once held cigarettes at a CVS store in New York. Signage where cigarettes used to be at a CVS store in New York City on Sept. 2, 2014. The drugstore chain eliminated tobacco products last year—sacrificing $2 billion in sales—after deciding that smoking clashed with its identity as a health care company. Then it turned the move into a marketing campaign.Photograph by Andrew Renneisen—The New York Times/Redux

A year after the cigarettes came off shelves, there are signs the move is paying off for the company overall. Front-of-store comparable sales were down 7.8% in the second quarter of 2015, in large part because of the lost tobacco revenue. However, revenue from pharmacy benefit services rose 11.9%, and the company lined up $11 billion worth of new contracts in the PBM business—gains that CVS believes are a by-product of the company’s improved reputation.

The overhaul that Foulkes is leading in the retail business is about extending those gains. CVS/pharmacy last year had $68 billion in sales, which on its own would make it the seventh-largest U.S. retailer, just behind Target (TGT). Its footprint is about to get even bigger. In June, CVS announced that it would spend $1.9 billion to acquire Target’s pharmacy and clinic business. When the deal closes, CVS will have about 9,600 pharmacy locations—each one an outlet for reaching consumers with the message that CVS has their health in mind.

That is crucial given the new era of disruption we’re entering in the health care industry. Spending on medicine in the U.S. will increase by some 30% between 2014 and 2018, according to IMS Health (IMS), thanks to an aging population and the emergence of specialty pharmaceuticals. At the same time, employers—including CVS—are raising deductibles on health plans. That means consumers will be paying a much bigger share of their own health care costs and shopping around more. The competition for customers will be that much fiercer. In a subtle way, pushing Kind bars instead of Oreos is part of that battle for consumer loyalty.

Foulkes calls this trend “the retailization” of health care and says she welcomes the challenge of using CVS stores not only to draw in casual shoppers but also to drive business back to the pharmacy benefits side of the business. “The health care system is going to undergo a lot of change,” she says. “Change is good for companies looking for opportunities.”

The behemoth that is CVS Health today is hardly recognizable from the regional drugstore chain Foulkes joined in 1992, soon after getting her MBA from Harvard Business School. At the time, CVS had about 1,400 stores in the Northeast, generating annual sales of almost $4 billion. All the large chains across the country—from Walgreens (WBA) to Eckerd to Rite Aid (RAD)—operated largely from the same playbook: fill prescriptions in the pharmacy in back, and in the front, sell everything from diapers to shampoo to soda.

A wave of consolidation began to sweep across the drugstore landscape in the late 1990s. Tom Ryan, a onetime pharmacist who served as CEO at CVS from 1998 to 2011, was among the most aggressive players in the industrywide M&A spree, snatching up rivals such as Longs Drugs and Sav-On. Depending on the most recent deal, CVS and Walgreens took turns as the industry king. Today Walgreens has some 8,200 locations and third-place Rite Aid has about 4,500. Walgreens has said it plans to close around 200 stores, while CVS is acquiring 1,700 Target pharmacies.


Ryan recognized major potential in Foulkes and gave her a career-changing assignment—before even she was convinced that she was ready. In 1997, when Ryan was COO, he plucked Foulkes out of a job in merchandising and asked her to start a loyalty program for CVS from scratch. Ryan gave her precious little guidance on how to do it, but she plunged in and figured it out on the fly.

The program she created, ExtraCare, has been a major success since it rolled out nationally in 2001. ExtraCare now has 70 million active members (defined as people who have used it in the past six months). And it has been an essential tool in helping CVS personalize offers to customers while also providing a trove of data to CVS about their shopping habits. (Walgreens didn’t launch a customer loyalty program until 2012, but its Balance Rewards has grown rapidly and now has 86 million members.)

In 2006, Ryan completely transformed CVS—and altered the dynamics of the drugstore industry—when he orchestrated a $22 billion deal to acquire the pharmacy benefits manager Caremark Rx, nearly doubling the size of his company by revenue. Suddenly CVS was courting health-plan administrators as well as individual customers.

Ryan again turned to Foulkes, then running marketing, with a key assignment. He asked her to come up with products that would show the value of the CVS/Caremark merger, which was being criticized by Wall Street. She ended up creating Maintenance Choice, a program that debuted in 2009 and allows patients on long-term drug regimens to get savings from 90-day prescriptions and receive their medication either by mail or, for the same price, in person at CVS pharmacies. Some 20 million customers now use Maintenance Choice.

CVS to buy Target's in-store pharmacy and clinic businessIn June, CVS agreed to pay $1.9 billion to acquire and operate some 1,700 Target pharmacies and clinics. It will be up to Foulkes to successfully integrate the new locations into CVS/pharmacy.Andrew Gombert—EPA/Corbis

Merlo, who succeeded Ryan as CEO in 2011, has continued the expansion into drug distribution. In 2014, CVS paid $2.1 billion for Coram, which delivers treatments to homebound patients. The same year, the company teamed with Cardinal Health to create the largest U.S. generic-drug purchasing operation, Red Oak Sourcing. And in August, CVS closed a $12.7 billion deal for Omnicare, a distributor of prescription drugs to nursing homes and assisted-living facilities. The buying binge has played well on Wall Street: CVS’s market value has doubled in just three years to some $120 billion.

Today CVS likes to think of itself as a one-stop shop for health care—with the PBM and CVS/pharmacy working together in a virtuous circle. The retail stores get 71% of their revenue (or $48 billion last year) from filling prescriptions (756 million of them in 2014), something Caremark helps fuel with its 65 million members. And every time a Maintenance Choice member opts to pick up meds from a store, there’s a chance she’ll buy a bottle of Windex or a tube of Colgate toothpaste while she’s there.

Just as crucially, CVS has been able to use the symbiotic relationship between Caremark and CVS/pharmacy to motivate more patients to stick to their drug regimens—a top priority for the health plans and managed-care organizations that Caremark is trying to woo. According to the American College of Preventive Medicine, only 25% of people are still taking medications they are supposed to one year after they get their prescription, a failing that costs the U.S. health care system more than $100 billion a year—for instance, when medication noncompliance leads to hospitalizations for patients with congestive heart failure.

Foulkes has been at the forefront of CVS’s efforts to boost adherence. In 2011 she led a team that created the company’s Pharmacy Advisor program, which offers counseling in stores and by phone to Caremark members with chronic conditions. A 2012 study commissioned by CVS found that face-to-face interventions by pharmacists increased adherence rates by 3.9%. “There was an opportunity for us to shift our model from just filling prescriptions as efficiently and productively as possible to providing services in the store that actually keep people on the medicines,” Foulkes says. Taking medication for a chronic condition is an experience that she knows firsthand.

“I remember when i found out I was having my fourth child, I was like, ‘Oh, no!’ ” Foulkes is in a conference room fielding questions from summer interns with her usual candor, and a young man has just asked her about work-life balance. She wasn’t sure she could manage. But juggling family and a fast-rising career, she says, taught her not to overthink everything. “You just take it one day at a time.”

That kind of practical approach has served Foulkes well, even as it helped lead her down a path she never would have imagined while growing up in Providence—building a career and life in her hometown. The oldest of five children of a prominent local lawyer—and the niece of former senator Chris Dodd of Connecticut—young Helena Buonanno planned to make her mark somewhere besides Rhode Island. “When I left for college, I thought I would never come back,” she says. “I was better than Providence.”

Foulkes studied economics at Harvard, where she graduated magna cum laude and met her future husband, Bill. Her adviser for her senior thesis was Larry Summers, who would go on to become Treasury Secretary and, for a while, president of Harvard. He recalls Foulkes as one of just a handful of undergrads he worked with over the years who came across as “extraordinarily effective”—another being Facebook COO Sheryl Sandberg (FB).

Foulkes stands in front of the pharmacy counter at a 10,000-square-foot mock-up store on the campus of the CVS Health headquarters in Woonsocket, R.I. As an undergrad econ major at Harvard, she impressed her thesis adviser, Larry Summers, as being “extraordinarily effective.”Foulkes stands in front of the pharmacy counter at a 10,000-square-foot mock-up store on the campus of the CVS Health headquarters in Woonsocket, R.I. As an undergrad econ major at Harvard, she impressed her thesis adviser, Larry Summers, as being “extraordinarily effective.”Photograph by Joe Pugliese for Fortune Magazine

After graduation, Foulkes took a job in investment banking at Goldman Sachs (GS) in New York City but found that she wasn’t captivated by the art of dealmaking. She then served a short stint at Tiffany & Co. (TIF), where she discovered her love of retail. (She also enjoyed the jeweler’s employee discount.) After getting her MBA at Harvard, she remained in the Boston area with her husband, who had a gig with Gillette. Foulkes started at CVS on July 22, 1992, her third wedding anniversary, and spent a few years commuting before the couple relocated.

Just as her career was beginning to take off, Foulkes was confronted with a scary personal crisis. One day in 1999, she was having lunch with her husband when he noticed a lump in her neck. It turned out to be early-stage thyroid cancer. Foulkes had surgery and was back on the job in a matter of weeks, leading the effort to launch ExtraCare. While she must take daily supplements for the rest of her life to replace her thyroid hormone, it hasn’t slowed her down much. Foulkes, who ran three Boston Marathons before her diagnosis, completed the New York Marathon in 2008. She views her annual checkup as a time to reflect on how things could have been a lot worse. Says Foulkes: “Every year it’s my ritual that reminds me how lucky I am.”

Her rising profile has led some to speculate that Foulkes is being groomed to be the next CEO of CVS Health. While the company hasn’t announced a formal succession plan, it’s clear that Foulkes would be a leading candidate to eventually replace Merlo—with an emphasis on eventually. Only four years into the CEO job, the 59-year-old Merlo is not likely to be going anywhere anytime soon. “I’m looking forward to leading the team for years to come,” says Merlo when asked about possible successors. Then he adds, jokingly, “There’s a lot of miles left in this guy.”

But Foulkes’s friend in the governor’s mansion says she definitely sees Foulkes as CEO material down the line. “She’s a leader,” says Raimondo. “She can motivate people, and that’s what every CEO needs to do.”

Foulkes, meanwhile, says she is totally focused on the day-to-day challenges involved in operating CVS/pharmacy. Assuming the deal gets finalized, that will soon include integrating the nearly 1,700 pharmacies CVS is buying from Target and making that underperforming business profitable. Foulkes will also need to stay on top of trends in a health care system that is changing quickly, particularly when it comes to the pharmacy business.

Rhode Island Gov. Gina Raimondo, a close friend, says she definitely sees Foulkes as CEO material down the line. “She’s a leader. She can motivate people, and that’s what every CEO needs to do.”

According to Adam Fein, president of Philadelphia research firm Pembroke Consulting, within just two years nine out of 10 drugs dispensed in the U.S. will be low-price generics, cutting into pharmacy revenues. At the same time, Fein is forecasting that specialty drugs—pricier treatments for problems ranging from high cholesterol to HIV—will soon generate 50% of the industry’s revenues. The competition for those lucrative prescriptions will go a long way toward determining who wins in the drugstore business long-term.

To grow sales outside the pharmacy, Foulkes must square off with CVS/pharmacy’s old retail rival, Walgreens. It won’t be easy. Walgreens has suffered from some missteps in recent years. For example, it permanently lost countless customers to CVS when for nine months in 2012 it refused to fill prescriptions for Express Scripts members because of a spat over reimbursement rates. But it’s done plenty of things right too. Walgreens sold off its own PBM a few years ago in order to focus more on the quality of its stores. And its merger with Alliance Boots has brought in more premium beauty products to a drugstore chain some already see as offering a more inviting retail experience. The YouGov Brand Index, which tracks consumer attitudes, has found that Walgreens regularly edges out CVS’s drugstores. Foulkes is counting on her team of merchants to help her close that gap.

Back in the mock store, the items that generate the most enthusiasm from Foulkes as she tours with her executives are in the beauty section. She is particularly taken with a new display for Makeup Academy, or MUA, a leading CVS store brand of beauty products. Unlike the clunky fixtures CVS now uses—which force customers to reach inside to pull out a stick of, say, lip balm—the stand-alone shelves coming this fall make products easier to reach, increasing the odds a shopper will engage. Foulkes, who early in her career at CVS was a category manager for cosmetics, remarks at how much the display pops with color. “It’s really inviting,” she says approvingly.

To Foulkes, every detail counts. “If you have a good experience in the front of the store,” she says, hammering home the message again, “you’re more likely to be comfortable using us in the pharmacy.” It’s strategic thinking worthy of a CEO.

To see the full Most Powerful Women list, visit

A version of this article appears in the September 15, 2015 issue of Fortune magazine with the headline “She thanks you for not smoking.”

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