CVS Caremark Corp., the largest provider of prescription drugs, said Wednesday that Chief Executive Officer Thomas Ryan will retire in 2011, four years after overseeing the company's biggest takeover. The company said it anticipates Larry Merlo, 54, will take over when Ryan steps down next May. Merlo has worked with CVS for 20 years, most recently as head of pharmacy retail operations, the chain said in a statement today. The board has appointed him president and chief operating officer, CVS said. Ryan is handing over the reins as competition intensifies with Wal-Mart Stores in retail and with Medco Health Solutions in pharmacy-benefit management services, added with the 2007 acquisition of Caremark. In the past year, CVS has lost PBM contracts and come under investigation over its business practices. Merlo's task will be to ensure the PBM and retail units work together to boost profit, said Helene Wolk, an analyst at Sanford C. Bernstein & Co. in New York. 'The challenge will be fully carrying on the vision, which is not to develop just the value of retail, or to restore the PBM to some functionality, but rather to create value through the combination of the two,' said Wolk The chain's more than 7,000 retail pharmacies continue to be the core of the company, said Jeff Jonas, an analyst with Gabelli & Co. in Rye, N.Y. 'The retail side where Larry Merlo comes from has always been best in class,' Jonas said. CVS's retail pharmacies and the pharmacy-benefit management business, run by Per Lofberg since January, each account for about half of the company's revenue. The company acquired Caremark in 2007 for about $27 billion. The PBM unit negotiates drug prices with manufacturers for corporate and government customers. CVS said this month its business practices are under investigation by 24 states. That's similar to a probe started by the Federal Trade Commission last year. CVS said it's cooperating with the investigations. Connecticut is part of a task force reviewing the relationship and practices of CVS and Caremark following their merger, Richard Blumenthal, the state's attorney general, said in March. CVS said it formed an office of the chairman, consisting of Ryan, Merlo and Lofberg, to help with the management transition. 'Larry was the key driver behind the Caremark merger and is working closely with Per to bring that into the retail business,' Ryan said at the company's annual meeting Wednesday. The CEO has spent 36 years at CVS, including 16 as president. With assistance from Julie Alnwick in New York. 