CVS Health posts revenue hike in Q2
Growth across all of CVS Health’s segments brought CVS Health’s Q2 revenues to $88.9 billion, an increase of 10.3% compared to the prior year period.
"Our diversified business model delivered strong results this quarter. We continue to execute on our strategy to expand access to health services across our care delivery channels and strengthen our engagement with consumers to improve their health and well-being,” said Karen Lynch, president and CEO of CVS Health.
The Woonsocket, R.I.-based retailer’s operating income decreased 30.7% primarily due to the decrease in adjusted operating income, a restructuring charge and acquisition-related transaction and integration costs recorded in the current year, as well as the absence of a $225 million pre-tax gain on the sale of PayFlex Holdings recorded in the prior year, the company said.
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CVS Health’s adjusted operating income decreased 10.4% primarily driven by declines in the healthcare benefits and pharmacy & consumer wellness segments. The decreases were partially offset by increases in the health services segment, the company said.
The company’s healthcare benefits segment’s total revenues increased 17.6% for the three months ended June 30, 2023 compared to the prior year driven by growth across all product lines.
The healthcare benefits segment’s adjusted operating income decreased 19.9% for the quarter compared to the prior year, reflecting increased outpatient utilization in Medicare Advantage when compared with pandemic influenced utilization levels in the prior year, as well as the impact of lower year-over-year prior period development. These decreases were partially offset by higher net investment income in the quarter compared to the prior year and the continuing benefit of operating expense leverage, CVS Health said.
The member benefit ratio increased to 86.2% in the quarter compared to 82.7% in the prior year driven by increased outpatient utilization in Medicare Advantage when compared with pandemic influenced utilization levels in the prior year, as well as the impact of lower year-over-year prior period development.
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Medical membership as of June 30, 2023, of 25.6 million increased 121 thousand members compared with March 31, 2023, reflecting increases in the Commercial and Medicare product lines. These increases were partially offset by a decline in the Medicaid product line, primarily attributable to the resumption of Medicaid redeterminations following the expiration of the public health emergency.
The health services segment saw total revenues increase 7.6% for the quarter compared to the prior year, primarily driven by pharmacy drug mix, growth in specialty pharmacy, brand inflation and the acquisitions of Oak Street Health and Signify Health. These increases were partially offset by continued pharmacy client price improvements, CVS Health said.
The health services segment’s adjusted operating income increased 3.5% for the three months ended June 30, 2023, compared to the prior year 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 pharmacy client price improvements and decreased COVID-19 diagnostic testing in the segment’s MinuteClinic walk-in medical clinics compared to the prior year, CVS Health said.
Pharmacy claims processed decreased slightly on a 30-day equivalent basis for the quarter compared to the prior year, reflecting an expected Medicaid customer contract change during the three months ended June 30, 2023 and a decrease in COVID-19 vaccinations. The decrease was largely offset by net new business.
Total revenues in the pharmacy & consumer wellness segment increased 7.6% for the quarter compared to the prior year, primarily driven by pharmacy drug mix, increased prescription volume and brand inflation. These increases were partially offset by the impact of recent generic introductions, decreased COVID-19 vaccinations, diagnostic testing and over-the-counter test kit sales, continued pharmacy reimbursement pressure and a decrease in store count, the company noted.
The pharmacy & consumer wellness segment saw adjusted operating income decrease 17.4% for the quarter compared to the prior year, primarily driven by continued pharmacy reimbursement pressure, decreased COVID-19 vaccinations and diagnostic testing, as well as lower front store volume, including the impact of a weaker cough, cold and flu season compared to the prior year and decreased contributions from COVID-19 OTC test kits. These decreases were partially offset by the increased prescription volume described above and improved generic drug purchasing, the company said.
Prescriptions filled increased 1.1% on a 30-day equivalent basis for the quarter compared to the prior year primarily driven by increased utilization, partially offset by a decrease in COVID-19 vaccinations and the decrease in store count. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased 2.4% on a 30-day equivalent basis for the quarter compared to the prior year, CVS Health said.
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Same store prescription volume increased 3.6% on a 30-day equivalent basis for the quarter compared to the prior year, or 4.9% excluding the impact of COVID-19 vaccinations.
CVS Health revised its full-year 2023 GAAP diluted EPS guidance range to $6.53 to $6.75 from $6.90 to $7.12 and confirmed its full-year 2023 adjusted EPS guidance range of $8.50 to $8.70. The company also confirmed its full-year 2023 cash flow from operations guidance range of $12.5 billion to $13.5 billion.