CVS Health reports strong Q1 results

Growth across all of the company's segments brought CVS Health’s Q1 revenues to $85.3 billion, an increase of 11% compared to the prior year period.

“We delivered another strong quarter while executing on the strategy we outlined in December 2021, leading to the close of the Signify Health acquisition followed quickly by Oak Street Health," said Karen Lynch, CVS Health president and CEO. "These additions are core to our strategy and will help unlock future growth as we push further into value-based care, which prioritizes keeping people healthy.”

The Woonsocket, R.I.-based retailer's operating income decreased 2.8% primarily due to the write-down of the company’s Omnicare long-term care business, the decrease in adjusted operating income described below and an increase in acquisition-related transaction and integration costs compared to the prior year. The decrease in operating income was partially offset by the absence of a $484 million opioid litigation charge recorded in the prior year and a decrease in amortization of intangible assets compared to the prior year, the company said.

[Read more: CVS Health completes acquisition of Oak Street Health]

CVS Health's adjusted operating income decreased 5.1% primarily driven by declines in the Pharmacy & Consumer Wellness segment. The decrease was partially offset by increases in the Health Services segment.

The company's healthcare benefits segment’s total revenues increased 12.1% for the three months ended March 31, 2023 compared to the prior year, driven by growth across all product lines.

The healthcare benefits segment's adjusted operating income decreased slightly in the quarter compared to the prior year primarily driven by the continued progression towards normalized utilization and lower impact from favorable development of prior-years’ healthcare cost estimates in the quarter compared to the prior year. These decreases were largely offset by higher net investment income and membership growth across all product lines in the quarter, CVS Health said.

The member benefit ratio increased to 84.6% in the quarter compared to 83.4% in the prior year reflective of the continued progression towards normalized utilization and lower impact from favorable development of prior-years’ healthcare cost estimates in the quarter compared to the prior year.

Medical membership as of March 31, 2023 of 25.5 million increased 1.1 million members compared with Dec. 31, 2022, reflecting increases across all product lines including an increase of approximately 900,000 members related to the individual exchange business within the commercial product line.

[Read more: CVS Health report highlights need for expanded role of retail pharmacists]

The healthcare benefit segment experienced favorable development of prior-years’ healthcare cost estimates in its government services and commercial businesses during the quarter, primarily attributable to fourth quarter 2022 performance.

The health services segment (formerly the pharmacy services segment) saw total revenues increase 12.6% for the quarter 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 pharmacy client price improvements, CVS Health said.

CVS Health's health services segment's adjusted operating income increased 14.2% for the quarter 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 and increased pharmacy claims volume. 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.

Pharmacy claims processed increased 3.7% on a 30-day equivalent basis for the quarter compared to the prior year. The increase was 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, pharmacy claims processed increased 4.8% on a 30-day equivalent basis for the three months ended March 31, 2023 compared to the prior year.

Total revenues in the pharmacy & consumer wellness segment (formerly the retail/long term care segment) increased 7.8% for the quarter, compared to the prior year, primarily driven by increased prescription and front store volume, pharmacy drug mix and brand inflation. These increases were partially offset by continued pharmacy reimbursement pressure, decreased COVID-19 vaccinations and diagnostic testing and the impact of recent generic introductions, CVS Health noted.

CVS Health's pharmacy & consumer wellness segment's adjusted operating income decreased 27.9% for the quarter compared to the prior year, primarily driven by continued pharmacy reimbursement pressure, decreased COVID-19 vaccinations and diagnostic testing and increased investments in the segment’s operations and capabilities. These decreases were partially offset by the increased prescription volume described above and improved generic drug purchasing, CVS Health said.

Prescriptions filled increased 2.5% on a 30-day equivalent basis for the three months ended March 31, 2023 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. These increases were partially offset by a decrease in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased 4.5% on a 30-day equivalent basis for the three months ended March 31, 2023 compared to the prior year.

CVS Health revised its full-year 2023 GAAP diluted EPS guidance range to $6.90 to $7.12 from $7.73 to $7.93 and its full-year 2023 adjusted EPS guidance range to $8.50 to $8.70 from $8.70 to $8.90. The company also confirmed its full-year 2023 cash flow from operations guidance range of $12.5 billion to $13.5 billion.