CVS Health reports strong Q3

Despite a challenging business environment, CVS Health’s total revenues for the third quarter increased to $89.8 billion, up 10.6% compared to the prior year period. GAAP diluted EPS was $1.75 and adjusted EPS was $2.21. 

Among CVS Health's year to date highlights: Total revenues increased to $264 billion, up 10.6% compared to the prior year; cash flow from operations was $16.1 billion; GAAP diluted EPS was $4.88 and adjusted EPS was $6.62.

“Our colleagues helped us deliver another quarter of positive results across our business areas. Despite a challenging business environment, we continue adapting to the changing needs of our consumers by connecting our care delivery capabilities in communities across the country, broadening access to care and lowering costs,” said Karen Lynch, president and CEO of CVS Health.

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 the company's Omnicare long-term care business, both of which were recorded in the prior year, CVS Health said.

The retailer's adjusted operating income increased 2.5% primarily driven by an increase in the health services segment. The increase was 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, the company said. 

The retailer's health care benefits segment's total revenues increased 16.9% for the quarter, compared to the prior year driven by growth across all product lines.

The health care benefits segment's adjusted operating income decreased 6.4% for the quarter, compared to the prior year reflecting increased utilization in Medicare Advantage, including the impact of lower year-over-year prior period development. The decrease was partially offset by higher net investment income in the three months ended September 30, 2023 compared to the prior year, CVS Health said.

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The MBR increased to 85.7% in the quarter compared to 83.4% in the prior year driven by the impact of lower year-over-year prior period development and increased utilization in Medicare Advantage, including outpatient and supplemental benefits such as dental and behavioral health, as well as over-the-counter and flex cards, compared to the prior year.

Medical membership as of Sept. 30, 2023 of 25.7 million increased 54 thousand members compared with June 30, 2023, reflecting increases in the Commercial and Medicare product lines. These increases were partially offset by a decline in the Medicaid product line, primarily attributable to the resumption of Medicaid redeterminations following the expiration of the public health emergency, the company said.

During the quarter, the segment experienced modestly unfavorable development of prior-periods' healthcare cost estimates in its commercial business, primarily attributable to a prior period provider settlement. This experience was substantially offset by favorable development in its government services business, CVS Health said.

The health services segment's total revenues increased 8.4% for the quarter compared to the prior year primarily driven by pharmacy drug mix, growth in specialty pharmacy, brand inflation and the acquisitions of Oak Street Health and Signify Health. These increases were partially offset by continued pharmacy client price improvements, the company said.

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The health services segment's adjusted operating income increased 10.8% for the quarter compared to the prior year primarily driven by improved purchasing economics, including increased contributions from the products and services of the company's group purchasing organization, as well as growth in specialty pharmacy. These increases were partially offset by continued pharmacy client price improvements.

The company reported that in the health services segment, pharmacy claims processed decreased slightly on a 30-day equivalent basis for the quarter compared to the prior year, reflecting the impact of a Medicaid customer contract change that occurred during the second quarter of 2023 and a decrease in COVID-19 vaccinations. These decreases were partially offset by net new business, CVS Health said.

The pharmacy and consumer wellness segment's total revenues increased 6% for the quarter compared to the prior year primarily driven by pharmacy drug mix, increased prescription volume and brand inflation. These increases were partially offset by continued pharmacy reimbursement pressure, the impact of recent generic introductions, a decrease in store count and decreased sales of COVID-19 OTC test kits, the retailer said.

CVS Health's pharmacy and consumer wellness segment's adjusted operating income remained relatively consistent at $1.4 billion in each of the three-month periods ended Sept. 30, 2023 and 2022, primarily due to continued pharmacy reimbursement pressure and decreased contributions from COVID-19 vaccinations, diagnostic testing and OTC test kits, largely offset by improved drug purchasing, the increased prescription volume described above and lower operating expenses during the same period in the prior year, the company said.

Prescriptions filled increased slightly on a 30-day equivalent basis for the quarter compared to the prior year primarily driven by increased utilization, largely offset by a decrease in COVID-19 vaccinations and the decrease in store count. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased 1.1% on a 30-day equivalent basis for the three months ended Sept. 30, 2023 compared to the prior year, the company said.

Same store prescription volume increased 2.7% on a 30-day equivalent basis for the quarter compared to the prior year, and increased 3.5% when excluding the impact of COVID-19 vaccinations.

CVS Health revised its full-year 2023 GAAP diluted EPS guidance range to $6.37 to $6.61 from $6.53 to $6.75 and confirmed its full-year 2023 adjusted EPS guidance range of $8.50 to $8.70. The company also confirmed its full-year 2023 cash flow from operations guidance range of $12.5 billion to $13.5 billion.