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05/04/2022

CVS Health posts strong Q1 results

CVS Health’s first quarter results brought increased revenue and earnings per share fueled by growth across all segments.
Sandra Levy
Senior Editor
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As the U.S. transitions out of the pandemic, CVS Health’s first quarter brought increased revenue. The Woonsocket, R.I.-based company saw first-quarter revenues up 11.2% year over year, totaling $76.8 billion.

The company reported GAAP diluted earnings per share of $1.74 and Adjusted EPS of $2.22.   

Operating income decreased 2.4% for the three months ended March 31, compared with the prior year. The decrease was primarily due to the establishment of a legal settlement accrual related to the pending agreement with the State of Florida to settle all opioid claims against the company for $484 million, which will be paid over a period of 18 years. The decrease was partially offset by the increase in adjusted operating income and a decrease in amortization of intangible assets compared to prior year.

[Read more: CVS Health declares 2021 the 'Year of the Pharmacist' in health trends report]

Adjusted operating income for the quarter increased 6.6%. The increase was primarily due to increased prescription and front store volume, including the sale of COVID-19 over-the-counter test kits, and the impact of COVID-19 vaccinations in the retail/long-term care segment and improved purchasing economics and growth in specialty pharmacy in the pharmacy services segment.

Net income was $2.3 billion, up from $2.2 billion a year earlier.

“Our strategy improves access to affordable, convenient and personalized health care, which benefits consumers and shareholders. We once again showed the power of our purpose and potential, building on our strong momentum and raising full-year guidance as a result,” said CVS Health president and CEO Karen Lynch.

Revenue from CVS Health’s retail/long-term care business increased by 9.2% in the quarter compared with the prior year. CVS Health said this growth was primarily driven by increased prescription and front store volume, including the sale of COVID-19 OTC test kits and the impact of a weaker cough, cold and flu season experienced in the prior year, as well as pharmacy brand inflation. These increases were partially offset by the impact of recent generic introductions, continued pharmacy reimbursement pressure and decreased COVID-19 diagnostic testing, the company said.

[Read more: CVS Health makes 2 executive appointments]

Adjusted operating income for the retail/long-term care segment increased 15.1% for the quarter, compared with the prior year. The increase was primarily driven by the increased prescription and front store volume, the impact of COVID-19 vaccinations and improved generic drug purchasing. These increases were partially offset by continued pharmacy reimbursement pressure, increased investments in the segment’s operations and capabilities and decreased COVID-19 diagnostic testing.

Prescriptions filled increased 5.1% on a 30-day equivalent basis for the three months ended March 31, 2022 compared to the prior year. The increase was primarily driven by increased utilization and the impact of a weaker cough, cold and flu season experienced in the prior year. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased 5.6% on a 30-day equivalent basis for the three months ended March 31, 2022 compared to the prior year.

Revenues from the pharmacy services segment increased 8.6 % for the quarter, compared to the prior year. The increase was primarily driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation. This was partially offset by continued client price improvements.

The pharmacy services segment’s adjusted operating income increased 8.6% for the 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, and specialty pharmacy. These increases were partially offset by continued client price improvements.

Total pharmacy claims processed increased 5.8% on a 30-day equivalent basis for the three months, compared to the prior year. The increase was primarily driven by net new business, increased utilization and the impact of a weaker cough, cold and flu season experienced in the prior year. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased 5.5% on a 30-day equivalent basis for the three months ended March 31, 2022 compared to the prior year.

Revenues from the healthcare benefits segment increased 12.8% for the three months. The company said that the increase was driven by growth across all product lines.

The healthcare benefits segment’s operating income decreased slightly for the three months ended March 31, 2022 compared to the prior year. The decrease was primarily driven by net realized capital losses and the continued progression toward normalized total medical costs. This was largely offset by membership growth across all product lines.

CVS Health expects its full-year 2022 GAAP diluted EPS from continuing operations to be in the range of $6.93 to $7.13 from $7.04 to $7.24. Adjusted EPS is projected to increase $8.20 to $8.40 from $8.10 to $8.30. The company’s full year 2022 cash flow from operations is projected to be in the range of $12 billion to $13 billion.

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