CVSHealth's total revenues for the quarter increased 35.2%, with growth primarily driven by the acquisition of Aetna, the company said in today's earnings call.
The acquisition of Aetna, brand name prescription price inflation as well as an increase in pharmacy claims, has helped propel CVSHealth's 175.3% net income increase for the three months ended June 30, compared to the year prior. Pharmacy results were offset by an increase in the generic dispensing rate.
Net income was also partially offset by higher interest expense primarily due to the financing associated with the Aetna acquisition and the assumption of Aetna's debt.
CVSHealth said the first three quarters of the year will see the highest earnings growth year-over-year, as it wraps up its addition of Aetna.
Its momentum in government business is driven by Aetna winning a five year Medicaid contract expansion with Florida Healthy Kids.
The consolidation of pharmacy, PBM and insurer is helping CVSHealth realize better-than-expected revenue and earnings.
The American Medical Association and other groups view the CVS\Aetna merger as a threat to competition that will increase prices. They are urging a federal judge to challenge the merger on anti-competitive grounds.
The $69 billion acquisition closed November 28, 2018, but final approval of a Department of Justice settlement agreement in which Aetna divested its Part D plans to WellCare, awaits the judge's signature.
EXPANSION IN HEALTHCARE BUSINESS
CVSHealth continues to make inroads into traditional healthcare. It is expected to have 50 HealthHUBS in four metro areas by the end of the year and have 1,500 locations by 2021, according to information released by the company today.
The company will also launch a hospital to home pilot in the fall of this year, as well as its home hemodialysis system.
This week, CVS Pharmacy, the retail division of CVS Health announced that customers will be able to enroll in CarePass at participating CVS Pharmacy locations nationwide, or online. The program offers free national pharmacy delivery on eligible prescriptions at a cost of $5/month membership or $48 a year.
ON THE RECORD
"CVS' second quarter results were above our expectations, with both the Retail and Pharmacy Services Segments demonstrating upward momentum as pharmacy claims and prescription volumes showed a healthy increase of 4% and 5.9%, respectively, while front-end same store sales also increased for the quarter," said Moody's vice president Mickey Chadha. "Although the company's 2019 operating income will be lower than what we had originally expected at the closing of the Aetna acquisition and challenges – particularly reimbursement pressures – remain, we are encouraged by the operating performance for the first half of the fiscal year and by the pace of debt reduction since the close of the acquisition."
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