CVS Health’s second-quarter 2019 results brought increased revenue and earnings per share. Revenue growth was primarily driven by the acquisition of Aetna, which the company acquired on Nov. 28, 2018, as well as increased volume and brand name drug price inflation in both the pharmacy services and retail/long term care segments.
For the quarter, CVS Health saw a 35.2% increase in revenue, which totaled $63.4 billion and adjusted earnings per share of $1.89. Operating income increased to $3.3 billion. However, operating expenses increased 65.2% compared to the prior year.
“We posted strong second-quarter results, with all of our businesses performing at or above expectations. These results demonstrate our ability to execute on our strategic priorities to accelerate enterprise growth as we seek to fundamentally transform the consumer health experience. Given our performance to date and our expectations for the remainder of the year, we are raising and narrowing our adjusted EPS guidance range to $6.89 to $7.00,” CVS Health president and CEO Larry Merlo said.
Merlo continued, “We made meaningful advancements on each of the priorities we outlined at our Investor Day in early June to differentiate, transform and modernize the delivery of care. While still early, we remain confident that we will be able to realize the potential of our innovative and powerful new business model to deliver enhanced value to our clients and the consumers we serve.”
CVS Health’s retail/long-term care segment saw revenues increase 3.7% for the quarter, which it primarily attributed to an uptick in prescription volume and branded drug price inflation, both of which were offset by reimbursement pressure and generic introductions. Operating income increased 169.7%, which the company said was due to the absence of the $3.9 billion pre-tax goodwill impairment charge related to the long-term care reporting unit recorded in the three months ended June 30, 2018. Operating income and adjusted operating income were both negatively impacted by continued reimbursement pressure, increased operating expenses primarily driven by the investment of a portion of the savings from tax reform in wages and benefits and declining year-over-year performance in the company's long-term care business.
The segment’s front-end revenue made up 22.7% of revenues, an increase driven by an increase in health product sales and the impact of the shift of sales associated with the Easter holiday from the first quarter of 2018 to the second quarter of 2019. Total prescription volume was up 5.9% on a 30-day equivalent basis for the quarter.
CVS Health’s pharmacy services segment saw revenues increase 4.2% over the prior year, which it said was due to brand-name drug price inflation as well as increased total pharmacy claims volume, partially offset by continued price compression and an increased generic dispensing rate.
The segment saw operating income increase by 9.6%, attributed to increased claims volume and improved purchasing economics, partially offset by continued price compression. The increase in operating income was also partially offset by increased intangible amortization related to Aetna’s mail order and specialty pharmacy operations.
The company’s health care benefits segment posted a $16.6 billion increase in revenue driven by the Aetna acquisition, which also drove a $1.1 billion increase in operating income. Medical membership remained consistent, which CVS Health said reflected increases in Medicare and Medicaid products, which were offset by declines in commercial products.
CVS Health confirmed its fiscal 2019 operating income guidance range of $11.8 billion to $12 billion and raised the guidance range for full-year adjusted operating income to between $15.2 billion and $15.4 billion from between $15.0 billion and $15.2 billion. The company also raised and narrowed its EPS guidance to between $6.89 and $7.00 from between $6.75 and $6.90.