CVS Health which is working to turn around the performance of certain businesses following the loss last year of some key prescription management contracts, saw profits drop thanks to lower pharmacy sales from its drugstores.
CVS reported first-quarter profits that dropped 17% to $953 million, or 92 cents a share, compared to $1.1 billion, or 1.04 per share, in the year-ago quarter. Revenues rose just 3% to $44.5 billion amid slumping same-store retail pharmacy sales.
CVS Health is working to overcome the loss of tens of millions of prescriptions after the Department of Defense’s Tricare plan signed a deal with Walgreens Boots Alliance and other pharmacies that excludes CVS pharmacies. Walgreens has also established a closer relationship with Prime Therapeutics , a larger PBM owned by Blue Cross and Blue Shield plans, that favors CVS’ rival.
“We continue to expect 2017 to be a rebuilding year,” CVS Health CEO Larry Merlo said in a statement accompanying its first-quarter earnings report.
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Insurance companies are narrowing their pharmacy networks and negotiating new deals with pharmacy benefit managers as well as drugstore chains to gain more leverage against the pharmaceutical industry and its development of new, more expensive drugs.
Two large health insurers, Anthem and Aetna, have said they are looking at new partnerships with pharmacies and PBMs and CVS could play a role in helping those insurers.
CVS executives wouldn’t elaborate on talks with either of those firms during Tuesday’s first-quarter earnings call but CVS Health CEO Larry Merlo said the company is committed to its diverse portfolio, offering employers and health plans both the ability to manage drug costs through its PBM as well as its national chain of pharmacies. “Clients want the flexibility of plan designs to meet their diverse needs,” Merlo told analysts during an 80-minute call to discuss first-quarter earnings.
Revenues in CVS pharmacy services segment increased 8.5% to $31.2 billion thanks to an increase in growth of pharmacy network claim volume. That helped increase overall revenues despite a 3.8% drop in revenues from its retail/long-term care segment to $19.3 billion in the first quarter. CVS blamed drop in sales to a “4.7% decrease in same-store sales, continued reimbursement pressure and an increase in the generic dispensing rate,” the company’s first-quarter earnings report said.
But Merlo said he sees improvement ahead for CVS’ retail pharmacy sales as the company implements new drug management programs and sees benefits from its acquisition last year of Target TGT pharmacies. “Target pharmacies are moving in the right direction,” Merlo told analysts.
Date:May 02, 2017