CVS Health reports Q3 results

Strong performance in the health services and pharmacy & consumer wellness segments were among the highlights of CVS Health’s third quarter results. So said David Joyner, CVS Health president and CEO, in releasing third quarter results.

"Our integrated model accelerates our ability to uniquely do what is most important to today's health care consumers: deliver lower cost of care, a simpler experience and better outcomes. Our third quarter results reflect strong performance in the Health Services and Pharmacy & Consumer Wellness segments, and also highlight the continued need to work across our enterprise and address macro challenges to the Health Care Benefits segment. My commitment to our CVS Health colleagues and our customers is to drive focused execution of our integrated strategy to improve the health of the 185 million people we are privileged to serve," Joyner said.  

CVS Health reported third quarter GAAP diluted EPS of 7 cents decreased from $1.75 in the prior year and Adjusted EPS of $1.09 decreased from $2.21 in the prior year, primarily due to a decline in the health care benefits segment's operating results, which reflect continued utilization pressure and premium deficiency reserves of approximately $1.1 billion recorded in the third quarter of 2024, related to anticipated losses in the fourth quarter of 2024 within the Medicare and individual exchange product lines. The premium deficiency reserves are expected to be substantially released during the fourth quarter of 2024, benefiting results in that period, CVS Health said.

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The Woonsocket, R.I.-based retailer reported third quarter total revenues increased 6.3% primarily driven by growth in the health care benefits and pharmacy & consumer wellness segments. The increase was partially offset by a decline in the health services segment, CVS Health said.

CVS Health's operating income decreased 77.5% primarily due to the decrease in adjusted operating income and restructuring charges of approximately $1.2 billion recorded in the current year.

The retailer's adjusted operating income decreased 42.8% driven by a decline in the health care benefits segment, primarily due to increased utilization and premium deficiency reserves recorded in the third quarter of 2024 related to anticipated losses in the fourth quarter of 2024. The decline was partially offset by increases in the health services and pharmacy & consumer wellness segments, the company said.

Health Care Benefits segment:

Total revenues increased 25.5% for the quarter compared to the prior year, driven by growth in the Medicare and Commercial product lines.

During the third quarter of 2024, the company recorded premium deficiency reserves of approximately $1.1 billion, primarily in its Medicare and individual exchange product lines related to anticipated losses for the 2024 coverage year. The $1.1 billion premium deficiency recorded was comprised of $394 million of operating expenses related to the write-off of unamortized acquisition costs and $670 million of health care costs.

During the quarter, the health care benefits segment had an adjusted operating loss of $924 million compared to adjusted operating income of $1.5 billion in the prior year. The change was primarily driven by increased utilization, the approximately $1.1 billion of premium deficiency reserves described above, the impact of higher acuity in Medicaid following the resumption of redeterminations and the unfavorable impact of the previously disclosed decline in the company's Medicare Advantage star ratings for the 2024 payment year. These decreases were partially offset by an increase in net investment income, the retailer said.

Medical membership as of Sept. 30, 2024 of 27.1 million increased 178,000 members compared with June 30, 2024, reflecting increases in the Commercial and Medicare product lines.

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Health Services segment:

Total revenues decreased 5.9% for the quarter compared to the prior year primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, increased contributions from the company's health care delivery assets and growth in specialty pharmacy, the company said.

CVS Health's adjusted operating income increased 17.4% for the quarter compared to the prior year primarily driven by improved purchasing economics. The increase was partially offset by continued pharmacy client price improvements and the previously announced loss of a large client, the company said.

Pharmacy claims processed decreased 16.5% on a 30-day equivalent basis for the quarter compared to the prior year, reflecting the previously announced loss of a large client.

Pharmacy & Consumer Wellness segment:

Total revenues increased 12.3% for the quarter compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations and pharmacy drug mix. These increases were partially offset by continued pharmacy reimbursement pressure, the impact of recent generic introductions and decreased front store volume, including the impact of a decrease in store count, the retailer said.

Adjusted operating income increased 14.9% for the quarter compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, as well as improved drug purchasing. These increases were partially offset by continued pharmacy reimbursement pressure and decreased front store volume in the quarter, the company said.

Prescriptions filled increased 6% on a 30-day equivalent basis for the quarter compared to the prior year primarily driven by increased utilization.

Same store prescription volume increased 9.1% on a 30-day equivalent basis for the quarter compared to the prior year.