Retailer expects to close Aetna deal before Thanksgiving
Net revenues for the three months ended September 30 increased 2.4%, or $1.1 billion, to about $47.3 billion, up from $46.2 billion in the prior-year quarter.
Revenues in the Pharmacy Services segment grew by 2.6% to around $33.8 billion. The increase was driven primarily by growth in pharmacy network and mail choice claim volume as well as brand inflation, partially offset by continued price compression. Pharmacy network claims processed during the period increased 5.4%, on a 30-day equivalent basis, to 394.5 million, compared to 374.2 million in the same quarter of the preceding year.
The increase in pharmacy network claim volume was primarily due to an increase in net new business. On a 30-day equivalent basis, mail choice claims processed during the period increased 7.4% to 71.8 million, compared to 66.9 million in the prior-year quarter. The increase in mail choice claim volume was driven primarily by the continued adoption of Maintenance Choice offerings and an increase in specialty pharmacy claims.
“Strong revenue and adjusted EPS [earnings per share], along with significant cash flow year to date, demonstrate our success in driving value,” said president and chief executive officer Larry Merlo. “Our year-to-date results continue to validate our confidence in the strength of our model. As we approach the closing of our transformative acquisition of Aetna, our integration teams are making great progress to assure that once final approvals are obtained, we can begin to execute on our integration plans.”
Merlo continued, “Given CVS Health’s performance year to date and our confidence in our expectations for the remainder of this year, we are confirming our stand-alone consolidated operating profit, adjusted earnings per share and free cash flow guidance for 2018. While CVS and Aetna remain separate companies today, the performance of both companies highlights the very solid financial foundation on which we’ll build our revolutionary new model that will transform the health care experience for consumers and, in the process, deliver substantial value for our shareholders.”
Revenues in the Retail/Long-Term Care segment increased 6.4% to around $20.9 billion. “The increase was primarily due to an increase in same-store prescription volume of 9.2%, on a 30-day equivalent basis, due to continued adoption of its Patient Care Programs, alliances with pharmacy benefit managers and health plans, our inclusion in a number of additional Medicare Part D networks this year, and brand inflation. This increase was partially offset by continued reimbursement pressure,” he added.
Same store-sales increased 6.7%, and pharmacy same-store sales increased 8.7%. The increase in pharmacy same-store sales was principally driven by the increase in pharmacy same-store prescription volumes described above, partially offset by continued reimbursement pressure and a negative impact of about 190 basis points due to recent generic introductions.
Front-end same-store sales increased 0.8% compared to the same quarter of the prior year. The increase in front-store same-store sales continued to benefit from strength in CVS’ consumer health care and beauty care categories.
The generic dispensing rate increased around 20 basis points to 87.2% in the Pharmacy Services segment and about 10 basis points to 87.3% in the Retail/LTC segment, compared to the prior-year period.
The company said that the regulatory approval process for its previously announced acquisition of Aetna is proceeding within a time frame consistent with expectations. On October 10, CVS and Aetna entered into a consent decree with the Department of Justice (DOJ) that allows the company’s proposed acquisition of Aetna to proceed, provided Aetna agreed to sell its individual stand-alone Medicare Part D prescription drug plans. As part of that agreement, Aetna entered into an asset purchase agreement with a subsidiary of WellCare Health Plans Inc. for the divestiture of Aetna’s stand-alone Medicare Part D prescription drug plans, which have an aggregate of approximately 2.2 million members. Closing of the divestiture is subject to the closing of the company’s proposed acquisition of Aetna. There are no remaining antitrust impediments to closing the proposed acquisition of Aetna.
The company still needs a handful of states to clear the deal, including New York, where state officials are considering blocking parts of it.
CVS said it has received approval from 23 of the 28 states it has filed with and is “well down the line” with the remaining five. The company still expects to close the deal before Thanksgiving.