CVS Health’s fourth-quarter 2019 results brought increased revenue and earnings per share. The Woonsocket, R.I.-based company saw fourth-quarter revenues of $66.9 billion and $1.73 in earnings per share. The full-year revenue represents year-over-year growth of 32%.
Net income increased $2.2 billion for the quarter and $7.2 billion for the year, both of which ended Dec. 31, 2019. The company attributed the increase primarily to higher operating income and noted that it was partially offset by higher income tax expense associated with the increase in pre-tax income. The increase for the year was also partially offset by higher interest expense primarily due to financing activity associated with the Aetna Acquisition and the assumption of Aetna’s debt as of the Aetna acquisition date, the company said.
CVS Health’s retail/long-term-care segment saw revenues increase by 2.5% in the quarter. Much of this growth was attributed to increased prescription volume — which was up 5.6% on a 30-day equivalent basis — and brand inflation, partially offset by continued reimbursement pressure and an increased generic dispensing rate. The segment’s front-store revenues increased 22.7% for the quarter, which CVS Health attributed to increases in health and beauty product sales. The segment's quarterly operating income was $1.9 billion — a $2.1 billion increase from the prior-year Q4 loss of $270 million.
For the year, the retail/LTC segment saw revenue increase by 3.1%, with prescription volume up 5.8% on a 30-day equivalent basis. The company attributed script growth largely to patient care program adoption, PBM collaboration and its preferred status in Medicare Part D networks. The year's operating income totaled $5.7 billion, marking a $5.2 billion increase over the full-year 2018. This was largely due to the absence of LTC-related impairment charges and offset by $231 million in store rationalization charges for underperforming stores that closed, as well as $205 million in pre-tax loss on the sale of Onofre.
"Client, patient and consumer reception to our innovative product and service offerings, including our HealthHub locations, has been positive," CVS Health president and CEO Larry Merlo said. The company has been expanding the HealthHub format, first with an expansion in Houston, where it was piloted, followed by rollouts in Atlanta, Florida, Philadelphia and southern New Jersey.
Revenue for the quarter from its pharmacy service segment increased 6.2% from the prior-year period, totaling $37 billion, with operating income of $1.3 billion. The company said this growth was driven by brand inflation as well as increased total pharmacy claims volume. This growth was partially offset by continued price compression and an increased generic dispensing rate, CVS Health said. For the year, revenue for the segment was $141 billion, with operating income of $4.7 billion The operating income increases in the quarter and full-year were attributed to increased claims volume, the addition of Aetna's mail-order and specialty pharmacy operations and improved purchasing economics, all of which were offset by price compression and intangible asset amortization of Aetna's mail-order and specialty operations.
Total pharmacy claims processed increased by 10.2% for the quarter, compared to the prior-year period. The company said the increase was primarily driven by net new business and the continued adoption of Maintenance Choice offerings. Full-year claims were up 6.6%.
In the pharmacy services segment, operating income and adjusted operating income increased 0.7%, for the quarter, compared to the prior-year period, primarily driven by increased claims volume, the addition of Aetna’s mail order and specialty pharmacy operations and improved purchasing economics, the company said. CVS Health said this was partially offset by continued price compression, and increased intangible asset amortization related to Aetna’s mail order and specialty pharmacy operations.
The company's healthcare benefits segment saw total revenue for the quarter of $17 billion, with annual revenue of $69.6 billion. Operating income for the quarter decreased by $46 million to total $386 million, while the full-year operating income for the segment totaled $3.6 billion, an increase of $3.2 billion over the prior year.
“As we work to transform the way health care is delivered to millions of Americans, we are driving continued business performance and generating positive momentum across the enterprise. Our fourth quarter and full-year financial results reflect strong financial and operational execution and a successful first year of integrating the Aetna business. We’re using our unmatched capabilities to create a higher-quality, simpler and more affordable health care experience, which benefits patients, clients and consumers and positions the company for continued success,” said president and CEO Larry Merlo.
Merlo noted that the company has raised its outlook for 2020. CVS Health now expects adjusted EPS of between $7.04 and $7.17 for the full year. Its cash flow from operations is expected to be roughly $10.5 billion to $11 billion.