CVS Health beats Q2 expectations with increase in prescription volume

Despite a challenging economic environment, CVS Health said its differentiated business model helped drive strong results for the three months ended June 30, 2022. 

The Woonsocket, R.I.-based company saw Q2 revenues of $80.6 billion, up 11% compared to the prior year period. Year-to-date revenues increased to $157.5 billion, up 11.1% compared to the prior year.

“Despite a challenging economic environment, our differentiated business model helped drive strong results this quarter, with significant revenue growth across all of our business segments,” said Karen Lynch, CVS Health president and CEO. “The continued success of our foundational businesses accelerated our strategy to expand access to health services and help consumers navigate to the best site of care. We remain a trusted community health destination for millions of individuals with health products and services that engage customers in all aspects of their health wherever and whenever they need it.”

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Operating income increased 5.6% primarily due to a $225 million pre-tax gain on the sale of PayFlex Holdings, which was consummated on June 1, 2022, and a decrease in amortization of intangible assets compared to the prior year. This increase was partially offset by a slight decrease in adjusted operating income, CVS Health said. 

Adjusted operating income decreased by $77 million in the second quarter compared to the prior year. The decrease in adjusted operating income was primarily driven by declines in the retail/LTC and corporate/ other segments. The decrease was largely offset by increases in the health care benefits and pharmacy services segments, the company said.

Revenues from the pharmacy services segment increased 11.7% for the three months ended June 30, 2022, compared to the prior year. The increase was primarily driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation. This increase was partially offset by continued client price improvements, the retailer said.

Adjusted operating income from the pharmacy services segment increased 5.7% for the second quarter compared to the prior year. The increase was primarily driven by improved purchasing economics, including increased contributions from the products and services of the company’s group purchasing organization. These increases were partially offset by continued client price improvements, decreased contributions from the pharmacy and/or other administrative services for 340B covered entities and increased restructuring and business integration costs in the three months ended June 30, 2022, compared to the prior year, CVS Health noted.

Total pharmacy claims processed increased 3.9% on a 30-day equivalent basis for the second quarter compared to the prior year. The increase was primarily driven by net new business, increased utilization and the impact of an extended cough, cold and flu season compared to the prior year. The increase was partially offset by decreased COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased 5.7% on a 30-day equivalent basis for the three months ended June 30, 2022, compared to the prior year.

Revenues from the health care benefits segment increased 10.9% for the second quarter, compared to the prior year. The increase was driven by growth across all product lines.

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Adjusted operating income in the health care benefits segment increased 13.4% for the second quarter, compared to the prior year. The increase was  primarily driven by strong underlying performance, including higher favorable development of prior periods healthcare cost estimates in the three months ended June 30, 2022 compared to the prior year, and membership growth across all product lines. These increases were partially offset by incremental investments to support growth in the business and net realized capital losses, CVS Health said.

The health care benefits segment experienced favorable development of prior periods healthcare cost estimates in its Government Services and Commercial businesses during the three months ended June 30, 2022, primarily attributable to first quarter 2022 performance.

Revenues from the retail/long-term care segment increased 6.3% for the second quarter compared to the prior year. The increase was primarily driven by increased prescription and front store volume, including the sale of COVID-19 over-the-counter test kits and the impact of an extended cough, cold and flu season compared to the prior year, as well as pharmacy brand inflation. These increases were partially offset by decreased COVID-19 vaccinations and diagnostic testing, the impact of recent generic introductions and continued pharmacy reimbursement pressure.

Adjusted operating income from the retail/long-term care segment decreased 9.1% for the second quarter compared to the prior year. The decrease was primarily driven by continued pharmacy reimbursement pressure, decreased COVID-19 vaccinations, increased investments in the segment’s operations and capabilities, and the absence of a $125 million gain from an anti-trust legal settlement recorded in the three months ended June 30, 2021. These decreases were partially offset by the increased prescription and front store volume, improved generic drug purchasing and the favorable impact of business initiatives in the three months ended June 30, 2022.

Prescriptions filled increased 1.6% on a 30-day equivalent basis for the three months ended June 30, 2022, compared to the prior year. The increase was primarily driven by increased utilization and the impact of an extended cough, cold and flu season compared to the prior year. This increase was partially offset by decreased COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased by 4.6% on a 30-day equivalent basis for the three months ended June 30, 2022, compared to the prior year.

CVS Health raised its full-year 2022 GAAP diluted EPS guidance range to $7.23 to $7.43 from $6.93 to $7.13 and raised its full-year 2022 adjusted EPS guidance range to $8.40 to $8.60 from $8.20 to $8.40. The company also raised its full-year 2022 cash flow from operations guidance range to $12.5 billion to $13.5 billion from $12 billion to $13 billion.