CVS Health posts strong Q4, full-year 2022 results
Growth across all segments drove strong fourth-quarter and full-year results for CVS Health.
For the three months and year compared to the prior year, total revenues for the retailer increased by 9.5% and 10.4%, respectively. Fourth-quarter revenues increased to $83.8 billion.
The retailer's operating income increased by 62.3% in the quarter compared to the prior year, primarily due to the absence of a store impairment charge of approximately $1.4 billion recorded in the prior year, as well as a pre-tax gain of $250 million on the sale of the company’s wholly-owned subsidiary bswift recorded in the quarter. These increases were partially offset by the decreases in adjusted operating income described below, the company said.
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CVS Health's operating income decreased 41.3% for the year compared to the prior year primarily due to $5.8 billion of opioid litigation charges and a $2.5 billion loss on assets held for sale related to the write-down of the company’s Omnicare long-term care business, both of which were recorded during 2022. These decreases were partially offset by the absence of the store impairment charge of approximately $1.4 billion and a $431 million goodwill impairment charge on the remaining goodwill of the LTC reporting unit, both of which were recorded in the prior year, a decrease in amortization of intangible assets compared to the prior year, as well as pre-tax gains of $250 million on the sale of bswift and $225 million on the sale of PayFlex Holdings recorded in 2022, CVS Health said.
“Last year was defined by outperformance across our foundational businesses, robust cash flow from operations and meaningful progress against our value-based care delivery strategy. 2022 was a year of progress, and we continue to build on that momentum with bold moves that will improve the healthcare experience,” said Karen Lynch, CVS Health president and CEO.
CVS Health’s adjusted operating income decreased $141 million in the quarter compared to the prior year, primarily driven by declines in the retail/LTC and corporate/other segments, largely offset by increases in the health care benefits and pharmacy services segments. Adjusted operating income increased $220 million in the year compared to the prior year primarily driven by increases in the health care benefits and pharmacy services segments. The increase was partially offset by declines in the retail/LTC and corporate/other segments.
CVS Health’s health care benefits segment’s revenue increased 11.3% and 11.2% for the quarter and year, respectively, compared to the prior year driven by growth across all product lines.
The health care benefits segment’s adjusted operating income increased 68.2% for the quarter compared to the prior year primarily driven by the net favorable impact of COVID-19 compared to the prior year and strong underlying performance, partially offset by the unfavorable impact of the flu compared to the prior year.
In addition, the segment’s adjusted operating income increased 19.4% for the year compared to the prior year primarily driven by the net favorable impact of COVID-19 compared to the prior year, strong underlying performance and membership growth. These increases were partially offset by incremental investments to support growth in the business, the unfavorable impact of the flu compared to the prior year and net realized capital losses.
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CVS Health’s pharmacy services segment saw revenues increase 11.2% and 10.6% for the three months and year, respectively, compared to the prior year primarily driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation. The increase was partially offset by continued client price improvements, the company said.
The pharmacy services segment’s adjusted operating income increased by 9% and 7.2% for the three months and year, respectively, 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. The increase was partially offset by continued client price improvements, CVS Health said.
Total pharmacy claims processed increased by 3.1% and 4.1% on a 30-day equivalent basis for the three months and year, respectively, compared to the prior year primarily driven by net new business, increased utilization and the impact of an elevated cough, cold and flu season compared to the prior year. These increases were partially offset by a decrease in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased by 4.6% and 5.1% on a 30-day equivalent basis for the three months and year, respectively, compared to the prior year.
The retail/LTC segment’s revenues increase 4% and 6.5% for the quarter and year, respectively, compared to the prior year primarily driven by increased prescription and front store volume, including the impact of an elevated cough, cold and flu season compared to the prior year, pharmacy drug mix and 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, CVS Health said.
The retail/LTC segment’s adjusted operating income decreased 25.1% and 12.0% for the quarter and year, respectively, compared to the prior year primarily driven by decreased COVID-19 vaccinations and diagnostic testing, continued pharmacy reimbursement pressure, increased investments in the segment’s operations and capabilities and decreased gains from legal settlements compared to the prior year. These decreases were partially offset by the increased prescription volume described above, improved generic drug purchasing and the favorable impact of business initiatives in the three months and year. The decrease in adjusted operating income for the year also was partially offset by increased front store volume, the company said.
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Prescriptions filled increased by .8% and 2.3% on a 30-day equivalent basis for the quarter and year, respectively, compared to the prior year primarily driven by increased utilization and the impact of an elevated cough, cold and flu season compared to the prior year. The increase was partially offset by a decrease in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased by 4% and 4.4% on a 30-day equivalent basis for the three months and year ended December 31, 2022, respectively, compared to the prior year.
The company issued its full-year 2023 GAAP diluted EPS guidance range of $7.73 to $7.93 and reaffirmed its full-year 2023 adjusted EPS guidance range of $8.70 to $8.90. CVS Health also issued its full-year 2023 cash flow from operations guidance range of $12.5 billion to $13.5 billion.