- CVS Health raised its full-year guidance in its second quarter earnings report despite a $77 million decrease in adjusted operating income primarily due to declines in its retail segment.
- The company’s Aetna subsidiary boosted earnings with reported gains of 922,000 covered lives compared to the second quarter of last year and growth in all product lines contributing to a nearly 11% rise in revenues year over year.
- Adjusted operating income was 9.1% lower in its retail division compared to the year prior due to a decrease in coronavirus vaccinations, “continued pharmacy reimbursement pressure” and the lack of an antitrust legal settlement gain that was recorded in the second quarter last year, according to the earnings report.
CVS beat Wall Street expectations in its second quarter earnings results, reporting $2.95 billion in profit, up from $2.8 billion the year prior.
Lowered coronavirus vaccinations tampered its retail operating income following a peak in cases earlier in the year due to the omicron variant, which spiked coronavirus infections in February. The company delivered about 6 million COVID-19 vaccinations in the second quarter compared to more than 8 million in the first.
The company expects that it has already administered 75% of the anticipated 20 million vaccinations this year, but expects coronavirus-driven items to produce nearly $3 billion in 2022 revenue, said Larry McGrath, senior vice president of business development and investor relations, on a Wednesday earnings call.
The company’s Aetna subsidiary continued to remain strong, driving membership up 4% year over year, despite its divestiture of Aetna’s Thailand business, which cost the payer 266,000 covered lives.
Its medical benefit ratio at 82.9% improved by 120 basis points compared to the year prior, suggesting normalizing medical cost trends.
Medicare remains one of the payer’s “strongest growth” segments as it grew membership across all Medicare products, CEO Karen Lynch reported on the call.
In particular, its Medicare Advantage membership continues to grow at a double-digit rate, outpacing the overall MA market.
Medicare Advantage has faced recent pressure from organizations like the CMS, which recently asked the public for feedback on how to improve the program after the HHS Office of Inspector General identified a pattern of improper coverage denials by MA plans.
CVS additionally lowered its outlook for its 340B pharmacy service business, with year over year contributions declining during the quarter. The company is attributing the loss to covered entities being “slower to agree to manufactured conditions.”
As a result, the company announced that it expects its pharmacy service business to be at the low end of its full-year adjusted operating income guidance range of $7.31 billion to $74.5 billion.
CVS has hit recent hurdles regarding the 340B drug discount program. On Friday, New York’s attorney general filed a lawsuit against CVS, alleging that the company violated anti-trust laws.
In its race to add more primary care services, the executive team further teased acquisition plans, with Lynch adding that the company could take the “next step on this journey” by the end of this year.
“We can’t be in ... primary care without M&A. We’ve been very clear about that,” Lynch said.
McGrath added that the company has been active in evaluating a wide range of assets around the care delivery space. CVS also signaled that it could potentially pursue multiple acquisitions, adding that there was “no one and done asset” in the market.
The teasers come amid a further-consolidating primary care market, with Amazon last week announcing its plans to acquire One Medical in a deal valued at $3.9 billion. Bloomberg reported in July that CVS had initially expressed interest in One Medical.