- Introduces CVS CostVantageTM and CVS Caremark
TrueCostTM to drive aligned incentives and deliver a
more transparent and sustainable reimbursement model
- Launches CVS HealthspireTM brand for Health
Services segment that simplifies access to multi-payor
capabilities, better aligns client service, and drives better
outcomes and greater lifetime member value
- Demonstrates ability to unlock value across superior assets
including CVS Caremark®, Aetna®, and CVS
Pharmacy® businesses
- Announces quarterly dividend of sixty-six and a half cents
($0.665 cents) per share, an
approximate 10% increase
- Reiterates 2023 financial guidance and initiates 2024
projections, outlining achievable long-term growth expectations
with clear opportunities to outperform
WOONSOCKET, R.I., Dec. 5, 2023
/PRNewswire/ -- Today at its 2023 Investor Day, CVS
Health® (NYSE: CVS) will share how its strategy and
combination of assets drives reliable, diversified, and
accelerating earnings growth, while also delivering superior care
and value to millions of Americans.
In addition, the company will introduce a new pharmacy
reimbursement model, announce a new brand for its Health Services
segment, and showcase continued growth opportunities for its
businesses.
"We are successfully executing on our strategy to advance the
future of health care while unlocking new value for consumers,"
said CVS Health President and CEO Karen S.
Lynch. "The combination of our businesses, and the key
growth areas we have invested in, drive our ability to lower the
total cost of care, improve health outcomes, and deliver on our
commitments to our customers, consumers, and shareholders."
Introducing CVS CostVantage, a more transparent
and sustainable model for retail pharmacy
CVS Pharmacy today announced CVS CostVantage, a new approach
that evolves the traditional pharmacy reimbursement model and
brings greater transparency and simplicity to the system. CVS
CostVantage will define the drug cost and related reimbursement
with contracted pharmacy benefit managers (PBMs) and payors, using
a transparent formula built on the cost of the drug, a set markup,
and a fee that reflects the care and value of pharmacy services.
These changes will also help ensure that CVS Pharmacy locations
will continue to be a critical touchpoint for consumers to access
affordable health care in their communities.
"We are leading with an approach that will shift how our retail
pharmacy is compensated by implementing a more transparent and
sustainable model that fairly aligns pharmacy reimbursement to the
quality services we provide," said Prem
Shah, PharmD, executive vice president, Chief Pharmacy
Officer and President, Pharmacy and Consumer Wellness, CVS Health.
"It provides our PBM and payor clients a foundational step towards
more pricing clarity for consumers."
CVS Pharmacy plans to launch CVS CostVantage with PBMs for their
commercial payors in 2025, working together to ensure a smooth
transition.
Following on from the launch of its Choice Formulary program
earlier this year, CVS Caremark today introduces TrueCost, a model
innovation that offers client pricing reflecting the true net cost
of prescription drugs, with visibility into administrative fees.
Simplified pricing will help consumers be confident that their
pharmacy benefit is providing the best possible price and will
allow members to have stable access to our national pharmacy
network. Through this approach, clients will have the flexibility
to choose a pharmacy benefit model that works best for the unique
needs of their members and plan, and CVS Caremark TrueCost provides
another valuable option for them. CVS Caremark plans to launch CVS
Caremark TrueCost in 2025.
Launching CVS Healthspire to define Health Services
segment
To help demonstrate the connection and convenience CVS Health
uniquely delivers, CVS Healthspire will be the new branded name for
the company's Health Services segment, including Caremark,
CordavisTM, Oak Street Health®, Signify
Health®, and MinuteClinic®. The groups within
CVS Healthspire will continue to focus on integration across the
company's assets to deliver connected patient care, pharmacy
benefits, and innovative provider support solutions in communities
across the country, making expert care simple, more accessible, and
more affordable.
The CVS Healthspire brand will begin to roll out publicly this
month and advance throughout 2024. Consumers will initially see
"Part of CVS Healthspire" appear on select CVS Health care delivery
offerings across digital and physical assets as the company
continues to create an integrated ecosystem for patients.
"Delivering care in a more integrated way - especially for
complex patients with chronic health conditions - improves health
outcomes and the patient experience," said Mike Pykosz, CEO of Oak Street Health and
interim president of Health Care Delivery. "We are already seeing
the benefits of our value-based model to lower the total cost of
care for customers, clients, and patients, and we believe we will
build on these results as we more fully integrate with our core
businesses."
Accelerating momentum through combined strength and
innovation of leading businesses
While CVS Health's business segments continue to be successful
and profitable on their own, there is a sizable opportunity to
continue strengthening these connections and create incremental
value for the overall company.
A notable example was the recent improvement of Aetna's Medicare
Advantage Star Ratings. In just a year, by leveraging the power of
the company's cross-enterprise assets and executional excellence,
Aetna was able to achieve 87% of their members in four star plans
or better for the 2025 plan year, a recovery from 21% in the
previous year.
"This achievement was due to the work across our Aetna, CVS
Pharmacy, and CVS Caremark colleagues. Even more important than our
ratings, these teams worked together to help members improve
medication adherence and overcome barriers such as costs and
transportation," said Lynch. "Our strong performance in this area
shows how we can quickly unite our businesses to achieve important
common goals."
Reiterating 2023 financial guidance, announcing 2024
full-year projections
CVS Health interim CFO Tom Cowhey
will detail the company's 2024 financial outlook, capital
deployment strategy, and long-term outlook and growth targets. The
company's unique combination of assets provides CVS Health with
clear opportunities for long-term outperformance, including through
Medicare Advantage margin recovery, incorporating Star Ratings,
starting in 2025; CVS CostVantage, the company's new retail
pharmacy pricing model; increased patient enrollment in Oak Street
Health; expanded product offerings through Signify Health; and
enhanced growth in core businesses from new offerings in health
care delivery.
"By broadening our portfolio of integrated products and
services, we expect to create a path to sustainable, profitable
growth," Cowhey said. "Our powerful cash generation capabilities
will support our strategic goals, prudent capital deployment, and
attractive return profile – while also providing opportunities for
meaningful long-term outperformance."
2023 Guidance
Today, the company is reiterating its
2023 guidance as shared on its November 1,
2023 earnings call:
- Total revenues: $351.5 to
$357.3 billion
- Operating income: $13.6 to
$14.0 billion
- Adjusted operating income: $17.2
to $17.6 billion
- GAAP diluted earnings per share ("EPS"): $6.37 to $6.61
- Adjusted EPS: $8.50 to
$8.70
- Cash flow from operations: Upper-end of $12.5 to $13.5
billion
2024 Guidance
The company is initiating its 2024
full-year projections:
- Total revenues: At least $366.0
billion
- Operating income: At least $15.0
billion
- Adjusted operating income: At least $17.2 billion
- GAAP diluted EPS: At least $7.26
- Adjusted EPS: At least $8.50
- Cash flow from operations: At least $12.5 billion
Announcement of increased quarterly dividend
CVS Health has announced that its board of directors has
approved a quarterly dividend of sixty-six and a half cents
($0.665 cents) per share, an
approximate 10% increase from sixty and a half cents ($0.605 cents) per share. The dividend is payable
on February 1, 2024, to holders of
record on January 22, 2023.
About CVS Health
CVS Health® is the leading health solutions
company, delivering care like no one else can. We reach more people
and improve the health of communities across America through our
local presence, digital channels and over 300,000 dedicated
colleagues — including more than 40,000 physicians, pharmacists,
nurses and nurse practitioners. Wherever and whenever people need
us, we help them with their health — whether that's managing
chronic diseases, staying compliant with their medications or
accessing affordable health and wellness services in the most
convenient ways. We help people navigate the health care system —
and their personal health care — by improving access, lowering
costs and being a trusted partner for every meaningful moment of
health. And we do it all with heart, each and every
day. Follow @CVSHealth on social media.
Cautionary Statement Concerning Forward-Looking
Statements
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements made by or on behalf of
CVS Health. Statements in this press release that are
forward-looking include, but are not limited to, references to CVS
Health Corporation's priority areas for strategic growth, financial
outlook, long-term growth targets, capital deployment, Ms. Lynch's
quotations, Mr. Cowhey's quotation, Mr. Shah's quotation, Mr.
Pykosz's quotation, the information under the headings "Reiterating
2023 financial guidance, announcing 2024 full-year
projections", including "2023 Guidance" and 2024 Guidance",
"Introducing CVS CostVantage, a more transparent and sustainable
model for retail pharmacy", "Launching CVS Healthspire Services to
define Health Services segment", "Accelerating momentum through
combined strength and innovation of leading businesses" and the
information included in the endnotes and reconciliations. By
their nature, all forward-looking statements are not guarantees of
future performance or results and are subject to risks and
uncertainties that are difficult to predict and/or quantify. Actual
results may differ materially from those contemplated by the
forward-looking statements due to the risks and uncertainties as
described in our Securities and Exchange Commission ("SEC")
filings, including those set forth in the Risk Factors section and
under the heading "Cautionary Statement Concerning Forward-Looking
Statements" in our most recently filed Annual Report on Form 10-K,
our Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 2023, June 30, 2023, and September 30, 2023 and our Current Reports on
Form 8-K.
You are cautioned not to place undue reliance on CVS Health's
forward-looking statements. CVS Health's forward-looking statements
are and will be based upon management's then-current views and
assumptions regarding future events and operating performance, and
are applicable only as of the dates of such statements. CVS Health
does not assume any duty to update or revise forward-looking
statements, whether as a result of new information, future events,
uncertainties or otherwise.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures,
including adjusted operating income and adjusted earnings per
share. In accordance with SEC regulations, you can find the
definitions of the non-GAAP items mentioned, as well as the
reconciliations to the most directly comparable GAAP measures,
below in this press release.
Media contact
Ethan
Slavin
860-273-6095
SlavinE@CVSHealth.com
Investor contact
Larry
McGrath
800-201-0938
InvestorInfo@CVSHealth.com
Reconciliations of Non-GAAP Financial Measures
to the Most Directly Comparable GAAP Financial Measures
Adjusted Operating
Income
(Unaudited)
The Company defines adjusted operating income as operating
income (GAAP measure) excluding the impact of amortization of
intangible assets, net realized capital gains or losses and other
items, if any, that neither relate to the ordinary course of the
Company's business nor reflect the Company's underlying business
performance, such as acquisition-related transaction and
integration costs, restructuring charges, office real estate
optimization charges, losses on assets held for sale, opioid
litigation charges and gains/losses on divestitures. The Company
uses adjusted operating income as its principal measure of segment
performance as it enhances the Company's ability to compare past
financial performance with current performance and analyze
underlying business performance and trends. The consolidated
measure is not determined in accordance with GAAP and should not be
considered a substitute for, or superior to, the most directly
comparable GAAP measure, consolidated operating income. The
following are reconciliations of projected operating income to
projected adjusted operating income:
|
|
Year
Ending
|
|
|
December
31,
|
|
|
2024E
|
|
2023E
|
|
2022
|
In millions
|
|
At
Least
|
|
Low
|
|
High
|
|
Actual
|
Operating income (GAAP
measure)
|
|
$ 15,009
|
|
$ 13,587
|
|
$ 13,992
|
|
$
7,954
|
Amortization of
intangible assets
|
|
2,000
|
|
1,915
|
|
1,895
|
|
1,785
|
Net realized capital
(gains) losses
|
|
—
|
|
345
|
|
345
|
|
320
|
Acquisition-related
transaction and integration costs (1)
|
|
230
|
|
440
|
|
420
|
|
—
|
Restructuring charges
(2)
|
|
—
|
|
507
|
|
507
|
|
—
|
Office real estate
optimization charges (3)
|
|
—
|
|
70
|
|
60
|
|
117
|
Loss on assets held
for sale (4)
|
|
—
|
|
349
|
|
349
|
|
2,533
|
Opioid litigation
charges (5)
|
|
—
|
|
—
|
|
—
|
|
5,803
|
Gain on divestiture of
subsidiaries (6)
|
|
—
|
|
—
|
|
—
|
|
(475)
|
Adjusted operating
income
|
|
$ 17,239
|
|
$ 17,213
|
|
$ 17,568
|
|
$ 18,037
|
(1)
|
During 2024 and 2023,
the acquisition-related transaction and integration costs relate to
the acquisitions of Signify Health, Inc. ("Signify Health") and Oak
Street Health, Inc. ("Oak Street Health").
|
(2)
|
During 2023, the
restructuring charges are primarily comprised of severance and
employee-related costs, asset impairment charges and a stock-based
compensation charge. During the second quarter of 2023, the Company
developed an enterprise-wide restructuring plan intended to
streamline and simplify the organization, improve efficiency and
reduce costs. In connection with the development of this plan and
the recently completed acquisitions of Signify Health and Oak
Street Health, the Company also conducted a strategic review of its
various transformation initiatives and determined that it would
terminate certain initiatives.
|
(3)
|
During 2023 and 2022,
the office real estate optimization charges primarily relate to the
abandonment of leased real estate and the related right-of-use
assets and property and equipment in connection with the planned
reduction of corporate office real estate space in response to the
Company's new flexible work arrangement.
|
(4)
|
During 2023 and 2022,
the loss on assets held for sale relates to the Company's
Omnicare® long-term care business ("LTC business")
reporting unit within the Pharmacy & Consumer Wellness segment.
During 2022, the Company determined that its LTC business was no
longer a strategic asset and committed to a plan to sell it, at
which time the LTC business met the criteria for held-for-sale
accounting and its net assets were accounted for as assets held for
sale. The carrying value of the LTC business was determined to be
greater than its estimated fair value less costs to sell and,
accordingly, the Company recorded a loss on assets held for sale
during the year ended December 31, 2022. During the first quarter
of 2023, a loss on assets held for sale was recorded to write down
the carrying value of the LTC business to the Company's best
estimate of the ultimate selling price which reflects its estimated
fair value less costs to sell. As of September 30, 2023, the
Company determined the LTC business no longer met the criteria for
held-for-sale accounting and accordingly the net assets associated
with the LTC business were reclassified to held and used at their
respective fair values. During 2022, the loss on assets held for
sale also relates to the Company's international health care
business domiciled in Thailand ("Thailand business"), which was
included in the Commercial Business reporting unit in the Health
Care Benefits segment. The sale of the Thailand business closed in
the second quarter of 2022, and the ultimate loss on the sale was
not material.
|
(5)
|
During 2022, the opioid
litigation charges relate to agreements to resolve substantially
all opioid claims against the Company by certain states and
governmental entities.
|
(6)
|
During 2022, the gain
on divestiture of subsidiaries represents the pre-tax gain on the
sale of wholly-owned subsidiary bswift LLC ("bswift"), which the
Company sold in November 2022, and the pre-tax gain on the sale of
PayFlex Holdings, Inc. ("PayFlex"), which the Company sold in June
2022.
|
Adjusted Earnings Per
Share
(Unaudited)
GAAP diluted Earnings Per Share ("EPS") and Adjusted EPS,
respectively, are calculated by dividing income from continuing
operations attributable to CVS Health and adjusted income from
continuing operations attributable to CVS Health by the Company's
weighted average diluted shares outstanding. The Company defines
adjusted income from continuing operations attributable to CVS
Health as income from continuing operations attributable to CVS
Health (GAAP measure) excluding the impact of amortization of
intangible assets, net realized capital gains or losses and other
items, if any, that neither relate to the ordinary course of the
Company's business nor reflect the Company's underlying business
performance, such as acquisition-related transaction and
integration costs, restructuring charges, office real estate
optimization charges, losses on assets held for sale, opioid
litigation charges, gains/losses on divestitures, as well as the
corresponding tax benefit or expense related to the items excluded
from adjusted income attributable to CVS Health and certain
discrete tax items.
The following are reconciliations of projected GAAP diluted EPS
to projected Adjusted EPS :
|
Year
Ending
|
|
December
31,
|
|
2024E
|
|
2023E
|
|
2022
|
|
At
Least
|
|
Low
|
|
High
|
|
Actual
|
In millions, except per share amounts
|
Per Common
Share
|
Net income attributable
to CVS Health (GAAP measure)
|
$
7.26
|
|
$
6.37
|
|
$
6.61
|
|
$
3.26
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
1.58
|
|
1.48
|
|
1.47
|
|
1.35
|
Net realized capital
(gains) losses
|
—
|
|
0.27
|
|
0.27
|
|
0.24
|
Acquisition-related
transaction and integration costs (1)
|
0.18
|
|
0.34
|
|
0.32
|
|
—
|
Restructuring charges
(2)
|
—
|
|
0.39
|
|
0.39
|
|
—
|
Office real estate
optimization charges (3)
|
—
|
|
0.06
|
|
0.05
|
|
0.09
|
Loss on assets held
for sale (4)
|
—
|
|
0.27
|
|
0.27
|
|
1.91
|
Opioid litigation
charges (5)
|
—
|
|
—
|
|
—
|
|
4.39
|
Gain on divestiture of
subsidiaries (6)
|
—
|
|
—
|
|
—
|
|
(0.36)
|
Tax impact of non-GAAP
adjustments (7)
|
(0.52)
|
|
(0.68)
|
|
(0.68)
|
|
(1.85)
|
Adjusted income
attributable to CVS Health
|
$
8.50
|
|
$
8.50
|
|
$
8.70
|
|
$
9.03
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
1,263
|
|
1,291
|
|
1,291
|
|
1,323
|
(1)
|
During 2024 and 2023,
the acquisition-related transaction and integration costs relate to
the acquisitions of Signify Health and Oak Street
Health.
|
(2)
|
During 2023, the
restructuring charges are primarily comprised of severance and
employee-related costs, asset impairment charges and a stock-based
compensation charge. During the second quarter of 2023, the Company
developed an enterprise-wide restructuring plan intended to
streamline and simplify the organization, improve efficiency and
reduce costs. In connection with the development of this plan and
the recently completed acquisitions of Signify Health and Oak
Street Health, the Company also conducted a strategic review of its
various transformation initiatives and determined that it would
terminate certain initiatives.
|
(3)
|
During 2023 and 2022,
the office real estate optimization charges primarily relate to the
abandonment of leased real estate and the related right-of-use
assets and property and equipment in connection with the planned
reduction of corporate office real estate space in response to the
Company's new flexible work arrangement.
|
(4)
|
During 2023 and 2022,
the loss on assets held for sale relates to the Company's LTC
reporting unit within the Pharmacy & Consumer Wellness segment.
During 2022, the Company determined that its LTC business was no
longer a strategic asset and committed to a plan to sell it, at
which time the LTC business met the criteria for held-for-sale
accounting and its net assets were accounted for as assets held for
sale. The carrying value of the LTC business was determined to be
greater than its estimated fair value less costs to sell and,
accordingly, the Company recorded a loss on assets held for sale
during the year ended December 31, 2022. During the first
quarter of 2023, a loss on assets held for sale was recorded to
write down the carrying value of the LTC business to the Company's
best estimate of the ultimate selling price which reflects its
estimated fair value less costs to sell. As of September 30, 2023,
the Company determined the LTC business no longer met the criteria
for held-for-sale accounting and accordingly the net assets
associated with the LTC business were reclassified to held and used
at their respective fair values. During 2022, the loss on assets
held for sale also relates to the Company's Thailand business,
which was included in the Commercial Business reporting unit in the
Health Care Benefits segment. The sale of the Thailand business
closed in the second quarter of 2022, and the ultimate loss on the
sale was not material.
|
(5)
|
During 2022, the opioid
litigation charges relate to agreements to resolve substantially
all opioid claims against the Company by certain states and
governmental entities.
|
(6)
|
During 2022, the gain
on divestiture of subsidiaries represents the pre-tax gain on the
sale of bswift, which the Company sold in November 2022, and the
pre-tax gain on the sale of PayFlex, which the Company sold in June
2022.
|
(7)
|
Represents the
corresponding tax benefit or expense related to the items excluded
from Adjusted EPS above. The nature of each non-GAAP adjustment is
evaluated to determine whether a discrete adjustment should be made
to the adjusted income tax provision. During 2022, the Company's
adjusted income tax provision also excludes the impact of certain
discrete tax items concluded in the first quarter of
2022.
|
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