CVS Health takes in $2.3 billion in profit during Q3
A number of factors contributed to the company's financial performance, including the August launch of Cordavis and its MA offerings.
Photo: Mario Tama/Getty Images
CVS Health logged strong earnings and revenue performance during the third quarter, hitting $2.3 billion in profit, the company said this week.
Total revenues increased to $89.8 billion, for the quarter and $264 billion for the year, up 10.6% compared to the prior year. Generated cash flow from operations reached $16.1 billion over that time.
CVS Health President and CEO Karen Lynch said during an earnings call that it's been a "challenging business environment," but the company adapted to consumers' changing needs by broadening care access and lowering costs.
A number of factors contributed to the company's financial performance, including the August launch of Cordavis, a wholly owned subsidiary that will work with pharmaceutical manufacturers to commercialize and/or coproduce biosimilar products for the U.S. market. Cordavis products will be FDA approved, and CVS expects this will help ensure a consistent long-term supply of affordable biosimilars.
Then in October, CVS announced Aetna's 2024 Medicare products – the largest Medicare offering in Aetna's history – which the company said feature more choices, flexible benefit allowances, a strong provider network and further simplified medical and prescription drug plans.
Also last month, the company announced that 87% of Aetna's Medicare Advantage members are in 2024 MA prescription drug plans that are rated 4 stars or higher (out of 5) by the Centers for Medicare and Medicaid Services.
CVS also appointed two new members to CVS Health Corporation's Board of Directors – Scott Kirby, CEO of United Airlines Holdings, and Michael Mahoney, chairman and CEO of Boston Scientific Corporation – and returned $779 million to shareholders through dividends during the three months ending September 30.
WHAT'S THE IMPACT?
The company generated operating income of $3.7 billion compared to a $3.9 billion operating loss in the prior year. The change was primarily driven by the absence of a $5.2 billion opioid litigation charge and a $2.5 billion loss on assets held for sale related to the write-down of CVS' Omnicare long-term care business.
Adjusted operating income increased 2.5%, primarily driven by an increase in the Health Services segment and partially offset by a decline in the Health Care Benefits segment. Adjusted operating income for the Pharmacy and Consumer Wellness segment remained relatively consistent compared to the prior year.
Interest expense increased $127 million, or 22.4%, due to higher debt in the three months ending September 30 to fund the acquisitions of Signify Health and Oak Street Health.
THE LARGER TREND
CVS Health officially completed its acquisition of Oak Street Health in May. The definitive agreement was announced in February, with the all-cash transaction valued at around $10.6 billion. Oak Street Health is a multi-payer, value-based primary care company focused on older adults, with a care model and technology platform it describes as scalable.
CVS financed the transaction with borrowings of $5 billion from a term loan agreement entered into on May 1, and existing cash and available resources. CVS Health said it's committed to maintaining its current credit ratings.
It's been a busy few months for CVS, with the company launching Virtual Primary Care in January, a virtual care offering focused mainly on primary care and mental health services. Through the launch, CVS is also expanding its virtual mental health services. Enrollees 18 and older are slated to have access to nationwide virtual mental health support from clinicians including licensed therapists and psychiatrists.
Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com
