CVS Health sees solid revenue, front-store growth
CVS Health reported an increase in third-quarter revenues, while posting a decrease in earnings per share. The Woonsocket, R.I.-based company had revenues of $67.1 billion, an increase of 3.5% from the prior year period. GAAP diluted earnings per share were $0.93, a decrease from $1.17 from the prior year.
Net income was $1.2 billion for the quarter, a decrease of 20.3%. The decrease was primarily due to an increase in the loss on early extinguishment of debt to $766 million in the three months ended Sept. 30, 2020, compared to $79 million in the three months ended Sept. 30, 2019. The decrease was partially offset by the higher operating income in the three months ended September 30, 2020, the company said.
“Our strong third quarter results demonstrate continued execution of our long-term strategic plan that is transforming the way health care is delivered. As an integrated health services provider, we’re developing holistic and innovative solutions that meet the needs of our customers in the community, in the home or in the palm of their hand," CVS Health president and CEO Larry Merlo said.
Merlo continued, “Our comprehensive pandemic response shows the power of a diverse and agile enterprise. We’ve opened more than 4,000 COVID-19 test sites across the country since March, and have administered over six million tests. We’re helping businesses and universities safely reopen and we were recently selected to administer COVID-19 vaccinations in long-term care facilities. We’ll continue to play a vital role in our nation’s recovery thanks to the tireless efforts of our nearly 300,000 employees.”
CVS Health’s retail/long-term-care segment saw revenues increase by 5.9% in the quarter. Much of this increased prescription volume, higher front store revenues, increased diagnostic testing and brand inflation. These increases were partially offset by continued reimbursement pressure and the impact of recent generic introductions.
The segment’s front-store revenues increased 2.7% for the quarter, which CVS Health attributed to strength in consumer health sales and an increase in basket size, partially offset by decreased customer traffic in the segment’s retail pharmacies as a result of the COVID-19 pandemic.
Prescriptions filled increased 4.6% on a 30-day equivalent basis in the quarter compared to the prior year. The increase was primarily driven by the continued adoption of patient care programs, the company said. Prescriptions filled in the quarter were adversely impacted by the COVID-19 pandemic, which resulted in reduced new therapy prescriptions. This was partially offset by greater use of 90-day prescriptions and increased immunizations, CVS Health said.
The segment's quarterly operating income was $1.3 billion, a 17.2% increase from $1.1 billion in the prior year.
Revenue for the quarter from its pharmacy service segment decreased 0.9% from the prior-year period, totaling $35.7 billion, with operating income of $1.6 billion. The company said this decrease was driven by previously disclosed client losses and continued price compression. This loss was partially offset by growth in specialty pharmacy and brand inflation.
Total pharmacy claims processed increased by 3.7% for the quarter, compared to the prior-year period. The company said the increase was primarily driven by net new business, partially offset by reduced new therapy prescriptions in the quarter as a result of COVID-19.
In the pharmacy services segment, operating income and adjusted operating income increased 16.7%, for the quarter, compared to the prior-year period, primarily driven by improved purchasing economics and growth in specialty pharmacy. The increase was partially offset by continued price compression and previously disclosed client losses. The increase in operating income also was driven by lower amortization expense in the three months, the company said.
The company's healthcare benefits segment saw total revenue for the quarter of $18.7 billion. Operating income for the quarter decreased 8.4% to total $949 million.
Merlo noted that the company raised its full year 2020 GAAP diluted EPS guidance range to $5.60 to $5.70 from $5.16 to $5.29 and its full year 2020 adjusted EPS guidance range to $7.35 to $7.45 from $7.14 to $7.27.
Its cash flow from operations is expected to be roughly $12.75 billion to $13.25 billion.