CVS Health’s pandemic strategy continues to pay off in Q1

Amid the pandemic, CVS Health’s first quarter brought increased revenue. The Woonsocket, R.I.-based company saw first-quarter revenues up 3.5% year over year, totaling $69.1 billion, and earnings per share of $1.68 — an increase of 9.8% over the prior year period. 

Operating income and adjusted operating income increased 3.4% and 2.2%, respectively, for the three months ended March 31, compared with the prior year. The company attributed the increase in both operating income and adjusted operating income to growth in the pharmacy services and healthcare benefits segments. This was partially offset by declines in the retail/long-term care segment, CVS Health said.

Net income was $2.22 billion, up from $2.01 billion a year earlier.

“We delivered strong first-quarter results and improved our outlook for the year,” said CVS Health president and CEO Karen Lynch. “We continue to execute on our strategy while simultaneously managing through a pandemic, helping the country on the road to recovery. Our unmatched assets and strength of our brand are driving results as we work toward improving care delivery and driving growth.”

Revenue from CVS Health’s retail/long-term care business increased by 2.3% in the quarter compared with the prior year. CVS Health said this growth was primarily driven by increased COVID-19 diagnostic testing and vaccinations and brand inflation. These increases were partially offset by lower front-store revenues, primarily due to the acceleration of demand in March 2020 as consumers prepared for the COVID-19 pandemic and a weak cough, cold and flu season; continued reimbursement pressure and the impact of recent generic introductions.

Adjusted operating income for the retail/long-term care segment decreased 26.7% for the quarter, compared with the prior year. The decrease was primarily driven by continued reimbursement pressure and the lower front-store volume, the company said. These decreases were partially offset by increased COVID-19 diagnostic testing in the three months ended March 31, 2021.

Prescriptions filled remained relatively consistent on a 30-day equivalent basis for the quarter compared to the prior year, with COVID-19 vaccinations and the continued adoption of patient care programs largely offset by the impact of a weak cough, cold and flu season, the acceleration of demand in March 2020 as consumers prepared for the COVID-19 pandemic and decreased long-term care prescription volume.

Revenues from the pharmacy services segment increased 3.8% for the quarter, compared to the prior year. The increase was primarily driven by net new business, growth in specialty pharmacy, product mix and brand inflation. This was partially offset by continued price compression and a weak cough, cold and flu season.

The pharmacy services segment’s adjusted operating income increased 27.6% for the quarter, compared to the prior year. The increase was primarily driven by improved purchasing economics and growth in specialty pharmacy. This was partially offset by continued price compression.

Total pharmacy claims processed decreased 1.0% on a 30-day equivalent basis for the three months, compared to the prior year. The decrease was primarily driven by a weak cough, cold and flu season. This was partially offset by net new business in the quarter.

Revenues from the healthcare benefits segment increased 6.7 % for the three months, primarily driven by growth in the Government Services business. These increases were partially offset by the unfavorable impact of the repeal of the HIF for 2021.

The healthcare benefits segment’s operating income increased 19.5% for the quarter, compared with the prior year. The increase was primarily driven by improved performance in the Government Services business and the impact of cost savings initiatives.

CVS Health raised its full-year 2021 GAAP diluted EPS from continuing operations to be in the range of $6.24 to $,6.36 from $6.06 to $6.22. Full year 2021 Adjusted EPS is projected to increase to $7.56 to $7.68 from $7.39 to $7.55. The company’s full year 2021 cash flow from operations is projected to be in the range of $12 billion to $12.5 billion.