Amazon (NASDAQ:AMZN) changed the game in retail in 2005 when it debuted its Prime loyalty program, and though it took a few years to really take off, once it did, it left the company's rivals struggling to catch up. 

The program's core perk -- its free two-day (soon to be one-day) shipping benefit -- took two of the key pain points out of e-commerce, and since Prime costs the same amount whether your order once a month or five times a day, members get more value from using it more often. That has driven sales for Amazon, helping to turn it into something of the retail default option for its members.

That's an enviable position to hold, and given the number of Prime members in the U.S. -- and the many other perks they get -- it's not enough for competitors to simply offer something similar. Walmart, for example, scrapped its paid membership service, and simply offers all customers free two-day shipping on qualifying orders over $35.

Now, though, CVS Health is making its own foray into the subscription loyalty program world with CarePass, a Prime-like service that will offer free delivery on eligible prescriptions. The move appears expressly designed as a counter to PillPack, the prescription drug delivery service that Amazon purchased in 2018 and merged into Prime. 

The exterior of a CVS.

CVS is trying to compete with Amazon. Image source: CVS.

What is CVS doing?

CarePass will cost either $5 a month or $48 a year. That's less than half the $119 annual cost (or $12.99 a month) of a Prime membership. The core perk of the program is free one- or two-day delivery of prescriptions and eligible purchases with no minimum purchase required. Its other features include:

  • A 24/7 pharmacist helpline that members can call to ask questions about their prescriptions or other health needs.
  • A 20% discount on CVS Health brand items, including over-the-counter medications, vitamins, and supplements, as well as personal care items. This benefit can also be used for in-store purchases.
  • A monthly $10 credit that can be applied to a selection of items sold in-store and online.
  • A changing selection of "surprise perks and bonus offers made available at key times throughout the year," according to a press release. "for example, members recently received a complimentary sports physical at their local MinuteClinic."

CVS has been testing CarePass in select markets, and found that members spend 15% to 20% more with the chain.

"We are thrilled to expand CarePass nationally, bringing simplified value to our customer while making it easier for them to care for themselves and their families," said CVS Pharmacy President Kevin Hourican in the press release. "Initial customer response has exceeded our expectations with members utilizing the program's full benefits and becoming more engaged across all of our digital offerings." 

Will this work?

Amazon has nothing to worry about, but CVS does have a strong grip on its niche, and this service might appeal to customers who regularly need prescriptions filled. The e-commerce leader has not yet established PillPack as a major player in the pharmacy space, which leaves the door open for CVS to build out this service.

Even if CarePass isn't a game-changer (and certainly not a real rival for Prime) it may tighten CVS's ties with its most loyal customers, and boost its online sales. This is something CVS should have done a decade ago, but its success from here will be limited by how entrenched Prime has become in people's lives.

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