WOONSOCKET – CVS Health Corp. reported net income of $1.9 billion, or $1.49 per diluted share, in the second quarter, a turnaround from a loss of $2.6 billion one year earlier, which itself was largely the result of a goodwill impairment charge of $3.9 billion.
Total revenue totaled $63.4 billion, a 35.2% increase year over year, broken down into the following categories:
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Pharmacy services
This category includes pharmacy benefit management. Segment revenue increase 4.2% to $34.8 billion, with operating income growing 9.6% to $1.2 billion. The services group processed 489 million pharmacy claims in the quarter. The company also said that it had a generic dispensing rate of 88.5%.
Retail/Long-term care services
Included in this segment are CVS Pharmacy operations along with the company’s long-term care services operations, which generated a $3.9 billion goodwill writedown a year earlier. Revenue increased 3.7% to $21.4 billion, with operating income turning a $2.2 billion loss into a $1.6 billion gain. It also filled 349.1 million prescriptions, compared with 329.7 million in the second quarter of 2018. Pharmacy same-store revenue increased 3.7% over the year, compared with an 8.3% increase a year earlier. Front-of-store sales showed same-store increase of 2.9%, reversing a 1% revenue loss in the second quarter of 2018.
Health care benefits
Driven by CVS’ acquisition of health insurer Aetna, benefits segment revenue increased from $764 million to $17.4 billion. Operating income for this piece of the business totaled $1.1 billion, compared with none in the same 2018 period. Medical membership in the health benefits segment totaled 22.8 million, with 8 million fully insured and 14.8 million under administrative services contracts. It also had 6 million members in a standalone Medicare prescription drug plan. Benefit costs were 84% of premium revenue for the quarter.
The company credited increased volume and brand-name drug price inflation in both of its Pharmacy Services and Retail/LTC segments for rising revenue.
The company said that overall, the quarter exceeded expectations and raised its earnings guidance range for the year.
“We posted strong second-quarter results, with all of our businesses performing at or above expectations,” CEO and President Larry J. Merlo stated in the earnings report. “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.
“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,” continued Merlo. “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’ stock price had increased 5.7% at of 11:24 a.m. on Wednesday to $57.13 per share following the earnings report. The report comes on the heels of rival Walgreens Boots Alliance Inc. announcing Monday the closure of hundreds of stores in the United States.
Chris Bergenheim is the PBN web editor. You may reach him at Bergenheim@PBN.com.
