CVS Health reaches Q1 net revenue of $43.2 billion on 18.9% growth
WOONSOCKET, R.I. - On Tuesday, CVS Health reported a first quarter net revenue increase of 18.9% to $43.2 billion for the three months ended March 31. Revenues in the Pharmacy Services Segment increased 20.5% to $28.8 billion, primarily driven by increase in prescription volume and growth in specialty pharmacy.
"We posted solid results this quarter and are off to a strong start in 2016," stated Larry Merlo, president and CEO. "Operating profit in the retail business was in line with our expectations while operating profit in the PBM exceeded our expectations, driven by strong prescription volumes," he said. "Our distinctive, channel-agnostic solutions are resonating strongly in the market as they continue to control patient and client costs while improving health outcomes. We continue to believe we have the right strategy for success in the evolving health care marketplace."
Revenues in the Retail/LTC Segment increased 18.6% to $20.1 billion thanks to the addition of the long-term care operations acquired as part of the acquisition of Omnicare in August 2015, the addition of the pharmacies and clinics of Target acquired in December 2015 and pharmacy same store sales growth.
Same store sales increased 4.2% versus the first quarter of last year. Same store sales were positively affected by approximately 125 basis points due to an additional day in 2016 related to leap year. Pharmacy same store sales rose 5.5% and pharmacy same store prescription volumes rose 5.9% on a 30-day equivalent basis. Pharmacy same store sales were negatively affected by approximately 360 basis points from recent generic drug introductions, and positively affected by approximately 130 basis points from the additional day in 2016 related to leap year.
Front store same store sales increased 0.7%. Front store same store sales were negatively affected by softer customer traffic, partially offset by an increase in basket size and the shift of Easter from April in 2015 to March in 2016, which positively affected front store same store sales by approximately 80 basis points. Front store same store sales were also positively affected by approximately 105 basis points from the additional day in 2016 related to leap year.
For the three months ended March 31, 2016, the generic dispensing rate increased approximately 170 basis points to 85.2% in the Pharmacy Services Segment and increased approximately 125 basis points to 85.7% in the Retail/LTC Segment.
Net income for quarter was down 6.1%, primarily driven by an increase in interest expense of $149 million and $61 million of acquisition-related integration costs, partially offset by an increase in operating profit. The increase in interest expense is primarily due to the issuance of $15 billion of long-term debt in July 2015 that was used to acquire Omnicare and the pharmacies and clinics of Target, as well as the debt assumed through the acquisition of Omnicare in August 2015.
Adjusted earnings per share for the three months ended March 31, 2016 $1.18, up from $1.14 for the three months ended March 31, 2015. GAAP earnings per diluted share for the three months ended March 31, 2016 was $1.04, compared to $1.07 in the prior year.