CVS Health's Q1 driven by solid sales gains

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CVS Health's Q1 driven by solid sales gains

By Sandra Levy - 05/06/2020

CVS Health’s first-quarter results brought increased revenue. The Woonsocket, R.I.-based company saw first-quarter revenues increase by 8.3% over last year’s fiscal Q1, totaling $66.8 billion. Net income was $2 billion, with adjusted earnings per share coming in at $1.91.

Net income reflected a substantial increase over the prior year, increasing by 41%, which the company attributed primarily to higher operating income and lower interest expense due to lower average debt. 

CVS Health’s retail/long-term-care segment saw revenues of $22.7 billion, an increase of 7.7% from a year ago. The company attributed this growth to increased prescription volume, higher front-store revenues and brand inflation, partially offset by continued reimbursement pressure and an increased generic dispensing rate.

The segment’s front-store revenue increased 8.5%  for the quarter, compared to the prior year, including an 8% increase in same-store sales. The company attributed the growth primarily to strength in consumer health and general merchandise sales, which was primarily driven by COVID-19 related sales; the expansion of the CarePass program; and the impact of the additional day in 2020 due to the leap year.

CVS rolled out its CarePass program nationwide last year, providing the first premium loyalty program to offer free national pharmacy delivery on eligible prescriptions, as well as fast, free shipping and instant discounts on certain CVS Health brand items and monthly rewards that can be used in-store and online.

Tom Caporaso, Clarus Commerce CEO said, "CVS already wins over customers for transactional benefits, but CarePass’ additional offerings, like 24/7 access to a live pharmacist, are meeting the emotional needs of its customers, ensuring peace of mind by consolidating shopping and health needs into one easy step, which can be done entirely online and from the safety of consumers’ homes. For many shoppers, this timeframe has been a defining moment for their brand loyalty, and CVS CarePass has given customers several reasons to stay.”

Prescriptions filled grew 8.2% on a 30-day equivalent basis for the quarter, compared with the prior year, including a 9.8% increase in same-store prescription volume. The growth was primarily driven by the continued adoption of patient care programs, greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for COVID-19, and the impact of the additional day in 2020 due to the leap year, according to CVS Health.

Revenue for the quarter from its pharmacy services segment were $35 billion, an increase of 4.2% from the prior-year period. The company said this growth was driven by specialty pharmacy, brand inflation and increased total pharmacy claims volume, including greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for the COVID-19 pandemic. This growth was partially offset by previously disclosed client losses, continued price compression and an increased generic dispensing rate.

Total pharmacy claims processed were 541 million, an increase of 12.4% for the quarter, compared to the prior-year period. The company said the increase was primarily driven by increased claims under the company’s agreement with IngenioRx, which began in the second quarter of 2019, and greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for the COVID-19 pandemic.

In the pharmacy services segment, operating income was $1.1 billion, an increase of 31.1% and adjusted operating income was $1.2 billion, an increase of 24.7%, for the quarter, compared with the prior-year period. CVS Health said that this growth was primarily driven by growth in specialty pharmacy, brand inflation and increased total pharmacy claims volume, including greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for the COVID-19 pandemic. The increase was partially offset by previously disclosed client losses, continued price compression and an increased generic dispensing rate, according to the company.

The company’s healthcare benefits segment saw total revenues of $19 billion, an increase of 7.4% for the quarter. Operating income was $1 billion, and adjusted operating income was $1.5 billion, a decrease of 5.2% and 4.5%, respectively, for the quarter, compared to the prior year period.

“We have a presence in communities across the country and interact with one in three Americans every year. We have a leading consumer brand with a diversified portfolio of essential healthcare businesses. When facing any health crisis, including this pandemic, we’re uniquely positioned to understand consumer and patient needs and how to address them. This includes increasing access to medicine and virtual care, and testing thousands for the virus every day to ready our country to reopen safely. We’re utilizing our innovation-driven healthcare model, scale and unique capabilities to benefit consumers across the healthcare system, and none of this could be done without the tireless dedication of our colleagues,” said president and CEO Larry Merlo.

While acknowledging the inherent and unprecedented uncertainty surrounding the ongoing COVID-19 pandemic and its impact, the company expects its full year 2020 GAAP diluted EPS guidance range of $5.47 to $5.60, its full year 2020 adjusted EPS guidance range of $7.04 to $7.17, and its full year 2020 cash flow from operations guidance range of $10.5 billion to $11 billion to remain unchanged.