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Larry Merlo, a former pharmacist, has been chief executive of CVS since 2011. He oversees the country’s largest chain of drugstores and walk-in clinics, and a major pharmacy benefit manager, which negotiates with drug makers for discounts on behalf of group buyers.

Last year’s acquisition of Aetna gives CVS a path to boost profits by nudging patients toward better health and lower-cost care. Now, CVS is testing HealthHub stores in Houston, which offer greatly expanded medical and wellness services, including in-house blood analysis, nutrition plans and yoga.

Merlo recently sat down with Barron’s for an interview. Below are edited excerpts. Read more in our cover story.

On the health care opportunity for CVS

The system has become costly and difficult to navigate. It’s defined by episodic care in a fee-for-service environment. There’s tremendous fragmentation. Some 60% of Americans have one or more chronic diseases—diabetes, hypertension, asthma, and so on. That’s estimated to account for 80% of all health costs.

We have community assets: 75% of the population lives within three to four miles of a CVS store. Patients might visit their doctor once a quarter, but they’re in their pharmacy 18 to 20 times a year. We have rich data. So you think about combining Aetna’s information about what patients need to do on their path to better health, with our being in the community with face-to-face interactions with pharmacists patients know and trust.

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On the CVS MinuteClinics

We’ve now seen more than 40 million patients at MinuteClinics. Half do not have a primary care physician. Nurse practitioners will visit area PCPs and say “this is what we are, and what we aren’t, and we can be a referral source for you.” Half of visits are nights and weekends.

It’s estimated that 30% to 40% of emergency room visits could be handled at a lower acuity setting at a dramatically lower cost. If we’ve got chest pains, we’re going to the E.R. But think about the infrastructure cost there. If we’re going for a sore throat, we’re still going to absorb our portion of the overhead.

If you’re feeling feverish, you can stop in a CVS, see a nurse practitioner, get a strep test, and have a prescription filled, all in about an hour. And we have one of the lowest operating costs. That’s an example of disruptive innovation. We can bend the cost curve.

On CVS’s HealthHub test stores

Picture 20% of floor space going away and being replaced with health care services. Those services carry a higher margin. We’ve given pharmacists panels of patients with chronic diseases, where we know their next best actions that go beyond medication. Pharmacists have been able to engage with those patients. We’ll be able to see whether that engagement results in action.

There are questions in fairness that we have not answered for Wall Street. What’s the long-term growth trajectory for this company? We want to make sure we don’t get out in front of our skis. We’re working fast and furious in terms of pilots underway so we can understand the trajectory. We’ve got an investor day scheduled in early June, and our goal is to provide more context then.

On using nurse practitioners and physician’s assistants at CVS clinics

There is a growing shortage of primary care physicians. It’s estimated to reach 90,000 this time next year. I was in Dallas recently with one of the health systems, and they were talking about the average time to get an appointment with a PCP approaching two weeks. That’s only going to get worse.

When you talk with physician’s assistants and nurse practitioners, they like and appreciate the clinical setting. They feel like it’s their own practice. You are seeing more programs for them in colleges across the country. We’ve got a lot of partnerships. The educational path for a doctor isn’t just two additional years—it’s six. And financially, don’t think about the average pay of a cardiologist. Think about a PCP, whose pay is much lower.

On digital services

If I go to the CVS app [takes out phone], if I want to have a video visit I can click on that. It’s powered by Teledoc but marketed as MinuteClinic. If I want to visit a MinuteClinic, I can get a list of them close to me, their hours and their wait times. Right now, the approximate walk-in wait time is 11 minutes. I can sign in and hold my place in line. We also have an app with Aetna and Apple Watch with rewards for healthy behavior. Digital is a high priority.

On the complexity of CVS’s business

On Wall Street, my sense is there’s a better understanding of the opportunity, and that CVS is in a unique position with the assets it has assembled. The question today is, how long is it going to take to do that, and how much is it going to cost?

Our capex budget will be $2.5 billion or $2.6 billion this year. We can repurpose part of that budget to bring some of these things to life, including rolling out HealthHub. I don’t see the need to put up billions and billions of capital over and above what we’ve talked about to bring this vision to life.

On those long receipts

People love their ExtraBucks Rewards! You can go into your app and set it up to give digital receipts instead of paper. I don’t do it because my wife would get mad at me. But we need to do a better job of explaining that option.

Write to Jack Hough at jack.hough@barrons.com