Manas
Mishra FEBRUARY 12, 2020
(Reuters) - CVS Health
Corp reported a higher-than-expected fourth-quarter profit on Wednesday as its
stores sold more medicines and the pharmacy benefit management (PBM) business
benefited from higher U.S. prescription drug prices.
The company, which
acquired health insurer Aetna for $69 billion in 2018, is not planning further
major deals until it has completed the Aetna integration and reduced the debt
load it took on, Chief Executive Larry Merlo told Reuters in an interview.
Aetna revenue nearly
tripled in the quarter from a year ago to $17.15 billion.
CVS, which gets
discounts and rebates from drugmakers in exchange for listing their products on
its formularies of preferred drugs, in turn guarantees rebates to its PBM
customers. Profits have diminished in the past few quarters as the rate of drug
price hikes has slowed under intensifying pressure from politicians of both major
U.S. parties.
The company played
down the role of rebate guarantees on a conference call with analysts, and said
it expects the issue to be immaterial to earnings as it heads into 2021.
“We’ve obviously been
working hard to reverse our rebate exposure, and we’ve seen that exposure has
lessened in our outlook for 2020,” said Derica Rice, head of CVS’ PBM unit, who
plans to leave the company after February.
The company forecast
total adjusted 2020 profit of $7.04 to $7.17 per share. The analysts’ average estimate
is $7.15 per share, according to Refinitiv data.
Barclays noted that
CVS has a track record of providing conservative initial forecasts compared to
its ultimate actual results.
CVS plans to offer
less expensive expanded health services such as blood pressure screening and
diabetes monitoring in 1,500 stores by 2021. Executives said they could
eventually expand the format dubbed HealthHubs to all of its stores.
CVS retail store sales
rose 2.5% to $22.58 billion, also helped by higher branded drug prices, while
sales in the PBM business rose 6.2% to $37.07 billion.
Slideshow (2 Images)
PBMs negotiate drug
discounts for health insurers and employers, and take a cut of the rebates
provided by drugmakers. They have been criticized by politicians and patient
advocates for their role in keeping U.S. healthcare costs high.
Excluding items, CVS
earned $1.73 in the quarter, beating Wall Street estimates by 5 cents,
according to IBES data from Refinitiv.
Total revenue for the
quarter rose 23% to $66.89 billion.
CVS shares were down
just over 1% at $73.00.
Reporting by Manas Mishra, Tamara Mathias in Bengaluru and Carl
O' Donnell in New York; Editing by Bill Berkrot
Our Standards:The Thomson
Reuters Trust Principles.
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