CVS reports strong Q3, raises full-year guidance

Growth across all segments brought CVS Health’s Q3 revenues to $81.2 billion, an increase of 10% compared to the prior year period.

Sandra Levy

11/2/2022

CVS Health's third-quarter 2022 results brought increased revenue.

The Woonsocket, R.I.-based company saw third-quarter revenues of $81.2 billion, an increase of 10% compared to the prior year, which CVS Health said was driven by growth across all segments.

GAAP loss per share for the quarter was $2.60, inclusive of $5.2 billion pre-tax opioid litigation charges and a $2.5 billion pre-tax loss on assets held for sale related to the Omnicare long-term care business. Adjusted EPS was $2.09.

“We delivered another outstanding quarter, and have raised full-year guidance as a result,” said Karen Lynch, CVS Health president and CEO. “We continue to execute on our strategy with a focus on expanding capabilities in healthcare delivery, and the announced acquisition of Signify Health will further strengthen our engagement with consumers.”

During the third quarter, CVS Health incurred an operating loss of $3.9 billion compared to $3.1 billion of operating income in the prior year. The difference was primarily driven by $5.2 billion in opioid litigation charges and a $2.5 billion loss on assets held for sale to write-down the company’s long-term care business in the current year, partially offset by the absence of a $431 million goodwill impairment charge on the remaining goodwill of the LTC reporting unit recorded in the prior year, CVS Health said.

Adjusted operating income increased $160 million in Q3 compared to the prior year. The increase in adjusted operating income was primarily driven by increases in the healthcare benefits and pharmacy services segments. The increase was largely offset by a decline in the retail/LTC segment, CVS Health said.

In the pharmacy services segment, revenue increased 10.7% for the quarter compared to the prior year. The increase was primarily driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation. The increase was partially offset by continued client price improvements, CVS Health said.

In addition, operating income in the segment increased 5.9% for the third- quarter, compared to the prior year. CVS Health said the increase was primarily driven by improved purchasing economics, including increased contributions from the products and services of the company’s group purchasing organization, partially offset by continued client price improvements.

Total pharmacy claims processed increased 3.6% on a 30-day equivalent basis for the quarter, compared to the prior year. The increase was primarily driven by net new business and increased utilization. The increase was partially offset by a decrease in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased 4.5% on a 30-day equivalent basis for the three months ended September 30, 2022 compared to the prior year.

In CVS Health's retail/LTC segment, revenues increased 6.9% for the quarter compared to the prior year. These increases were primarily driven by increased prescription and front store volume, including the sale of COVID-19 over-the-counter test kits, as well as pharmacy drug mix and brand inflation. These increases were partially offset by decreased COVID-19 diagnostic testing and vaccinations, the impact of recent generic introductions and continued pharmacy reimbursement pressure, the company said.

The company's retail/LTC segment’s adjusted operating income decreased 18.9% for the quarter, compared to the prior year. The decreases were driven by decreased COVID-19 diagnostic testing and vaccinations, continued pharmacy reimbursement pressure, as well as increased investments in the segment’s operations and capabilities. These decreases were partially offset by the increased prescription and front store volume described above, improved generic drug purchasing and the favorable impact of business initiatives in the quarter, the company said.

Prescriptions filled increased 1.8% on a 30-day equivalent basis for the three months ended Sept. 30, 2022 compared to the prior year primarily driven by increased utilization, partially offset by a decrease in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased 3.6% on a 30-day equivalent basis for the third quarter, compared to the prior year.

In the healthcare benefits segment, revenues increased 9.9% for the quarter, compared to the prior year. The company said the increase was driven by growth across all product lines.

In addition, operating income in the healthcare benefits segment increased 39.6% for the quarter compared to the prior year. CVS Health said the increase was primarily driven by the net favorable impact of COVID-19 compared to the prior year and strong underlying performance, including higher favorable development of prior-periods’ healthcare cost estimates in the quarter compared to the prior year. These increases were partially offset by incremental investments to support growth in the business and net realized capital losses, CVS Health said.

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

CVS Health revised its full-year 2022 GAAP diluted EPS guidance range to $3.12 to $3.22 from $7.23 to $7.43 and raised its full-year 2022 adjusted EPS guidance range to $8.55 to $8.65 from $8.40 to $8.60. The company also raised its full-year 2022 cash flow from operations guidance range to $13.5 billion to $14.5 billion from $12.5 billion to $13.5 billion.

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