CVS Health revenues increase in Q2

CVS Health announced operating results for the three months ended June 30, 2024.

The Woonsocket, R.I.-based company's revenues increased to $91.2 billion for the quarter, up 2.6% compared to the prior year. 

“We have many points of differentiation that position us to win now and into the future. Our innovation is accelerating more transparent pharmacy reimbursement models, increasing the use of biosimilars, and providing better patient outcomes through our connected health care delivery assets,” said Karen Lynch, president and CEO of CVS Health. “Our integrated model and our strategy are enabling us to execute in a challenging environment and we are delivering the value our customers demand. We are taking action today to ensure we make the most of our many opportunities, including leadership changes in the health care benefits segment.”

CVS Health's GAAP diluted EPS of $1.41 decreased from $1.48 in the prior year and Adjusted EPS of $1.83 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 the unfavorable impact of the company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, the company said. 

[Read more: CVS launches new pharmacy reimbursement model, brand for health services segment]

For the three months ended June 30, 2024 compared to the prior year: 

• Total revenues increased 2.6% 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.  

• Operating income decreased by 5.8% primarily due to the decrease in adjusted operating income. The decrease was partially offset by the absence of a $496 million restructuring charge recorded in the prior year as well as a decrease in acquisition-related transaction and integration costs compared to the prior year. 
•  Adjusted operating income decreased 16.4% primarily driven by declines in the Health Care Benefits and Pharmacy & Consumer Wellness segments. The decrease was partially offset by an increase in the Health Services segment. 

Total revenues in the healthcare benefits segment increased 21.4% for the quarter compared to the prior year driven by growth in the Medicare and Commercial product lines. 

The healthcare benefits segment's adjusted operating income decreased 39.1% for the quarter compared to the prior year primarily driven by increased utilization and the unfavorable impact of the previously disclosed decline in the company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, higher acuity in Medicaid primarily attributable to the resumption of redeterminations, as well as a change in estimate related to the individual exchange business risk adjustment accrual for the 2023 plan year recorded in the second quarter of 2024. These decreases were partially offset by a favorable year-over-year impact of prior period development and an increase in net investment income, CVS Health said. 

The MBR increased to 89.6% in the three months ended June 30, 2024 compared to 86.2% in the prior year driven by increased utilization and the unfavorable impact of the company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, as well as the higher acuity in Medicaid and the change in estimate related to the individual exchange business risk adjustment accrual described above. These increases were partially offset by the favorable year-over-year impact of prior period development. 

[Read more: CVS Health reports strong Q3]

Medical membership as of June 30, 2024 of 27.0 million increased 200,000 members compared with March 31, 2024, reflecting increases in the Medicare and Medicaid product lines, including the commencement of the Medicaid Oklahoma contract on April 1, 2024. 

Based on the current performance and outlook for the health care benefits segment, CVS Health said it has decided to make leadership changes effective immediately. Brian Kane is leaving the Company. Karen Lynch will assume direct leadership of the health care benefits segment. Both Lynch and Tom Cowhey, CFO of CVS Health will be overseeing the day-to-day management of this business. In addition, Katerina Guerraz, executive vice president and chief strategy officer, will be the chief operating officer of the health care benefits segment.  

The health services segment's total revenues decreased 8.8% 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, CVS Health said. 

The health services segment's adjusted operating income increased 1.1% for the three months ended June 30, 2024 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 reported that in the health services segment, pharmacy claims processed decreased 18.3% on a 30-day equivalent basis for the three months ended June 30, 2024 compared to the prior year, reflecting the previously announced loss of a large client. 

Total revenues in the pharmacy and consumer wellness segment increased 3.7% for the quarter compared to the prior year primarily driven by increased prescription volume 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 and lower contributions from COVID-19 over-the-counter test kits since the expiration of the public health emergency in May 2023.

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

The pharmacy and consumer wellness segment's adjusted operating income decreased 12% for the quarter, compared to the prior year primarily driven by continued pharmacy reimbursement pressure and decreased front store volume, including lower contributions from COVID-19 OTC test kits. These decreases were partially offset by increased prescription volume, improved drug purchasing and pharmacy drug mix, the company said. 

The company reported that prescriptions filled increased 3.6% on a 30-day equivalent basis for the three months ended June 30, 2024 compared to the prior year primarily driven by increased utilization. 

CVS Health revised its full-year 2024 GAAP diluted EPS guidance to a range of $4.95 to $5.20 from at least $5.64 and revised its full-year 2024 Adjusted EPS guidance to a range of $6.40 to $6.65 from at least $7.00. 

The company also revised its full-year 2024 cash flow from operations guidance to approximately $9 billion from at least $10.5 billion. The company’s guidance revision reflects continued pressure in the health care benefits segment, partially offset by strong performance in the health services and pharmacy and consumer wellness segments.