CVS - Earnings call transcript Q3 2017

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CVS Health third quarter 2017 earnings call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session.

As a reminder, this conference is being recorded today, Monday, November 6, 2017. to President conference of like McGuire, to now Vice Senior Investor would turn over the Mike I Relations. Please go ahead, sir.

Michael P. McGuire

following Good the this CVS also and Merlo, Operating Officer, Thank us. Pharmacy, President and Dave are Nelson. morning, Helena question-and-answer Roberts, thanks Vice participate our and will you, Chief Jon for Denton, I'm prepared Executive here today and Foulkes, morning with President Larry and session us CFO. with remarks. in CEO, and everyone, joining President of

the follow-up. Q&A, more in ask Also, to people keep in rumors please our more policy mind chance no marketplace. is During or their information guidance. that performance in questions, additional to prepared in the as on provide a question that it order presentation please facts to not regarding limit a note comment and slide with a to well operating speculation one we our yourself the our and posted with website summarizes figures some on quick Please remarks, as that have than our

will will XX-Q too and that quick website. available have on this our afternoon Form be I reminder. filed do Our be one

Day City. Tuesday, New for is Analyst December in XX annual Our scheduled York

hear from XXXX guidance. management it, have opportunity comprehensive as as our members strategies growth well the During who for of our our you'll senior will of several to team, update a provide driving long-term

December XX. to unable webcast. the that's meeting those attend, Tuesday, be For will Again,

to in are be from performance, forward-looking in risks views review market XX-K on regarding specific described statements. encourage events, we file materially uncertainties and those Risk the and will statement subject may cautionary our to and disclosures this you presentation, Annual forward-looking most and with statements the financial what indicated actual reports to Report could XX-Q. Factors that Form in SEC cause and These our filed Additionally, certain future our forward-looking to conditions. recently we that results that of related during risks uncertainties, differ statements reflect are these particular the our section Form future the make current information in We the in the strongly industry

You entitled section in release. the also Forward-Looking our earnings press should review Statements

measures we our In company's our will accordance you call use with regulations, on During one about these of to the website. today's archived year. And non-GAAP the be on always, can reconciliations following is financial this website, comparable measures when being call Investor Relations and SEC for talking it the call, performance. as non-GAAP our measures GAAP webcast will portion of there find

Larry Now, this I'll to turn over Merlo.

Larry J. Merlo

in on approximately generated XX.X%, the the billion cash in On line PBM business the and billion Retail/Long-Term to operating to hurricanes. with year that expectations, just Care $X.X within few that date. below an of was basis, a along reflecting expectations Okay. due performance in Thanks, adjusted the Mike. down $X that during increased Good share thanks Texas, $X.XX, morning, more range. quarter We results, of total revenues and through have our Louisiana, at from for guidance, of the high-end the despite Starting at Puerto joining earnings Rico. our today. third devastating our impact midpoint I'll And of guidance company everyone, swept delivered the adjusted and profit in free We performance the was that us with per expectations, minutes. segment with was X.X%, Florida hurricanes quarter

to currently the our per narrowing year-to-date the range remainder guidance expectations in $X.XX. range results his guidance And compares both more $X.XX discuss that in we to share for our achieve for year-over-year to and of $X.XX EPS of of of year, We full-year to our expect to $X.XX, our and given of midpoint. the X.X% XXXX earnings previous adjusted and reflecting performance will the Now, raising are detail growth and Dave details adjusted remarks. X.XX%, our

our were before only the the paths financial regard regard closed are on estimate And not costs storms this not some to left XX impact the total, turning million, to cover destruction. cannot which in hurricanes, approximately The considerable but want time, be stores financial insurance some I deductibles. and their of period and colleagues also our about of recovery color the efforts. remain these stores business in the impact to to update, immune to closed. damage in XXX provide to In Now, our today, were business, to $XX is we for primarily and that understated,

roles in of these and recovery we storms the afterwards part of communities, to both aid vital a advance as played Now, efforts.

enabled Our who delivery paths, urgent in to medications ensure between other their and and proprietary homes of locations. and specialty this in and rapid hurricanes' helped shelter patients communications safe were patients platform for messaging the transition

colleagues been Additionally, more $XX to cash, grateful our and donated in and raised than products who, with own supplies dealing incredibly while impacted million communities, their to and has we are the support to in rebuilding and efforts our extraordinary process customers. in made time, continue a challenges, for will The part our and support. helping providing communities these do of we'll many personal long aiding take

business the and I'll update, with start PBM. to turning Now,

January all support you're a XXXX. services five-year agreement provide signed aware, with to to their new we IngenioRx, beginning PBM, As Anthem in

to These of relationship, processing critical for Anthem their private our Anthem to proposition, services value the control optimize the members. we'll have prescription execute them pharmacies. their business grow claims operationally services IngenioRx's functions. be in we help IngenioRx, improve seamless this to of will their PBM financial order performance, ability as through through And including and enhance mail specialty and part agreement, ensure experience IngenioRx a labeled will order As fulfillment certain manage and and for

health the expertise multiple is on will support in improving to be Anthem patient at and our focused points this outcomes very Additionally, messaging touch engagement patient relying IngenioRx through our goal. and in patient on point-of-sale

business, system. in help important we this our the ensure is implementation members. plays to excited further and with success this services healthcare coordinated forward look and today's we innovative their So, contract to starting to model of validation care care that and that new we're new Anthem with for believe holistic pharmacy very in relationship, provide role to integrated Health's CVS working about continuing Combined winning the

the of Now, gross another to make as for $X wins, new have With new approximately wins we've good we $X.X progress. currently million $XXX selling billion. billion XXXX continued season, of in and business net

announced our include XX% at about said roughly were year, PDP, on Med quarter, we we've numbers I'll than rate but not individual XX%. these To-date, that's last of impact I which As contract, our new previously shortly. our line completed include the at retention D business touch with stands FEP do renewals of in where point from specialty the any XXXX, last and and more for client loss this

that help not also will lower deliver five overall anchored Additionally, cost new This with outcomes we approach savings savings, It and is innovative and a value-based in classes. utilizes cost only healthcare by improve highly-utilized up performance-based unit that members. but pharmacy will adherence XX,XXX-store to announced network clinical Walgreens, compliance. through is Pharmacy order recently that costs XX,XXX clients management for their formulary network community-based drug to also solution helps to through outcomes to provide high-impact, for an achieve The be improved to along designed network CVS independently-owned the pharmacies.

next this health lowering patients to we and improving March we're to year, for clients look and excited and cost overall for make to implementation wellness, while our So, available forward of payers. beginning in

our to to in XX.X%, business, the factors. specialty compared driven in Turning revenue slowdown was and years is revenue quarter being growth the growth several prior by

the consistent of lower First, on we seeing with drugs, inflation levels marketplace. specialty are

the top And Second, top we're within our pressures, pharmacy C overall specialty as remains seeing growth within to is an expand which know in increase margin. and but and in drag fewer business these gain continues line, benefit a shifting you as towards line as share. book despite therapies the lower-priced And of strong lastly, a generic well to dispensing our on mix specialty, hep is scripts. specialty drugs

Before turning Med D let on Retail, our touch me PDP. to briefly SilverScript,

the X year, drugs consecutive a on the customer health CMS for under the service. in for tiers. delivering or performance a Caremark XX% all and D we from qualified The currently $X-deductible beneficiaries outstanding to which auto-assignees continued rating XXXX for regions. for enables is of our retain SilverScript I'm a also reported a third country, achieved to receive value, XX value outcomes and providing have achieved in the period the reduce enrollment which across to us annual enrollees, of and of auto-assignees plans regions, premiums importantly, new underway, in rating, the to note pleased XX access plan industry X-star majority surpassing for plan that, quarter, speaks SilverScript of we standards for we currently As And worked clinical all clients. deliver X-star SilverScript management, XXXX, serve, we to XX all the last Med lives

on in slightly with the pharmacy basis due continued about decreased Now, a and a same-store volumes X.X% sales volumes. volumes network to the restrict same-store on expectations, increased impact Retail/Long-Term of CVS have and up prescription moving changes equivalent a when approximately segment, same-store down equivalent pharmacy the script on to to by And X.X%. impacted X.X%, results the been X.X% had ahead TRICARE participating on Same-store Pharmacy were negative to fully-insured negatively generic sales negatively the XXX for recent total Care third prime XX-day XXX prescription points adjusting point again, than introductions. quarter, slightly and The decisions in sales networks Pharmacy comps. comps from in quarter network impact better sales expectations, changes, XX-day basis basis, basis. would

focused from promising. with and and the all with in to return coming Optum, uptake very years the drive to partnerships look Scripts clients seen have Express growth, capture to we as and partnering we Cigna payers on and our of some pipeline opportunities be continue remains Now, to healthy additional share, volumes

XXXX Additionally, market. and the Med the prescription plan several will further year, drive for these Choice preferred CVS as being us as networks in and well Pharmacy networks Med to volume include for be WellCare. Health that SilverScript And help Aetna/First preferred growing the D plan the will preferred in networks believe in more we these D

front to back strategies sequentially front turning and a adjusting decline promotions with as year, comps Easter and the page decreased after this count. our promotional reducing our case the circular line number scaling rationalize reflects comps factors, the in by shift, X.X%, to store the mass it's on including in QX of decision Now, for comps our store, been

front Softer customer the was the basket. by increase customer partially continued store traffic in offset average

in Our our personalization contributing been successfully front brands. store strategies have as has growth store profitability, promotional in to and growth

sales Our opportunity. XX.X% the remains store and points of up about an and front from strength ago, XX a quarter, brands and basis it in year store of represented that's area

front in gross these improved all comps. of despite decline of result again front the year, a quarter factors, As last in store store margin versus the once

over word before it say about Now, critical epidemic. like that's the crisis a and opioid in a to I I and turn would to heartbreaking alarming healthcare, Dave, American

announced fight and further strengthening commitment you expansion misuse. with balance this and know, enterprise-wide an our are the with help these leveraging expansion, the epidemic, As Caremark. Pharmacy the the of of initiatives the CVS September, we CVS powerful medications to national we of providers need presence risk patients abuse With capabilities our to in for of

help the a people unwanted XX the Teach they prescription Over been communities, help dangers in tons XXX,XXX worked the medications. partnership, students our XXX to on on give as connects disposed without naloxone, with nearly and educated chance access with of of need of CVS years, schools and the and focused pharmacists for opioid that and through prescription to to few Pharmacists we recovery. local past overdose-reversal their lives collected to we've also have more drug, a program a prevention, get abuse. And we've than safely drug expand save We've result, states collection metric

care, that the and more patients the are injuries is ensure institute first an And condition. treatment quantity as it on limits who pharmacy that leading acute time medical the there's a to provider of needs fits opioids time opioid However, of in to receiving prescription done. believe of the to be to dispensed the we for

me ensure work our for with it the the review. limit of to critical and plan patients pharmacies acute other to have with with let stakeholders we retail days financial while PBM our sponsors, and seven appropriate prescriptions services, that, needs Dave And utilizing care. for dispensed access So physicians, to will to over patients, continuing to turn certain opioids supply

David M. Denton

Larry, you, good Thank morning, everyone. and

our XXXX. how a enhance highlighting I'd I to as our begin approach shareholder capital allocation do, First, expectations of I'll to third typically of like by discuss to remainder our the detailed that results, follow then review for value. quarter discussion continues and disciplined with

As dividends to and capital date. the begin third payout. relates to in $X.X billion it We our $XXX in allocation our with year quarter dividend paid let's program, million

at over years. includes the the payout ratio approximately the items which non-GAAP quarters, in both dividend impact stands trailing Our XX.X% four of

Excluding our these by target non-GAAP way items, we the remain end XX% of of our well to XXXX. on

third quarter, date, share. million to we've billion $XXX Year shares $XX.XX repurchased the approximately for approximately X XX million. During or $X.X we've million for approximately shares per repurchased

includes For year. approximately increase repurchases, of $X of the the versus our reflecting completion full of an last year, guidance share XX% billion

between are again, expect the we've So $X months our to for than and $X shareholders we repurchases to dividends the first more year once of returned billion return the share in repurchases, billion nearly full XXXX, nine complete. and

as the well QX, the year. negative strong to year year-to-date of build-up long as the free plan in free of a a mentioned, the receipts. Medicare is associated built cash with plan nine that with year Larry CMS payable up the flow of in high In CMS The the for last of timing we abnormally time, months D settle first XXXX generated expecting current As $X due the payable are Part plan was year. performance the associated for we we as time cash first to nearly have billion

this, cash continue and produce and of guidance maintaining expect our free year to the XXXX. billion $X.X to Given for in $X we billion between are full prior

basis, are end as statement, guidance our website. the Now of a share as results reconciliation be comparable adjusted earnings per per in our to found to per the at share, of of Investor release adjusted earnings turning $X.XX and GAAP income in on These the the share can the delivered press we range. high of Relations portion well

the hurricanes. effects profit recent within segment the by primarily profit our the noted, than Retail/Long-Term expected, Larry declined PBM segment's As while expectations more delivered the driven of Care

was Care's the our impact Excluding profit hurricanes, Retail/Long-Term within of the expectations.

earnings end as tax negative rate Our pension expected impact the share $X.XX guidance. tax benefit better settlement our by per allowing the as the the EPS defined diluted us forecast, well at effective of plan our beat high lower the deliver with our was to on above share, GAAP loss adjusted rate. the of per of offset than hurricanes expectations, the

same-store The quickly the increased consolidated the increases in X.X% inflation, end to Care's In by me low X.X% the despite our the was same dispensing third an largely XX PBM growth basis of revenues specialty quarter LY the sales by increased decreased Let rate changes X.X% range. was to lower growth down in a provide than was growth $XX.X in was billion. pharmacy discussing. points been This revenues primarily pharmacy the revenues point quarter to below Retail/Long-Term some additional in expected XX%. driven in guidance growth we've the pharmacy. approximate PBM XXX color. basis offsetting the to generic generic This brand driven script our the network Partially XXX basis approximately primarily stronger walk dispensing year-over-year increase billion. rate versus quarter quarter and than XX.X%. basis, expected network the $XX.X this was of claims, Care driven points volumes. In business, P&L increased and to billion, segment, to our On in expectations. beating by growth, $XX.X Retail/Long-Term

of expenses, reflect quarter XXX contraction quarter, the compared our tax have was guidance profit, periods approximately of company current non-GAAP operating reconciled for margin operating reflected basis a rate, margin, Turning consolidated The points prior also which gross both XXXX. that that Keep when adjustments. on to and in I'll numbers applicable, XX.X% third website. mind cite to these in our and QX the in gross the been the adjustments

pressures as segment's each versus business to business. addition faster our the decline X.X% year, in continued mix shift than primarily last business, In Retail/Long-Term changes the from grow in part performance, have Care in segment decreased Retail/Long-Term quarter of previously lower-margin a to to as profit same loss Gross and the discussed, is enterprise. the the continues we dollars well reimbursement PBM network the due to across of pricing the our Care due as the scripts

segment, the were Care year. benefits through Part as operations, increased more driven the XXXX improvement decreased on the approximately by was was in slowly PBM operating XXX fourth at down in of worked last declined down also adjusted changes basis the year. quarter the as GDR approximately by compared our with by of operating the generic XX% margin Medicare from pharmacy from Gross to members in basis Care Larry This ongoing that revenues while Gross from primarily points an well to their due points X.X% points points which X.X%, expectations. the over purchasing Gross XXXX, versus with a XX XX gross approximately timing the year margin during store to QX margin segment basis the was This within points the primarily Consolidated by was as lower basis revenues favorable loss into as was PBM well Operating due profit decline offset points partially the in X% pressure to front The QX Within this the mentioned consolidated Part basis rate for X.X%. as primarily declined continued continued total primarily to expense well X%. XX percent profit economics. earlier. basis. profits D declined approximately basis as of driven to dollars reimbursement timing the margin Retail/Long-Term margin scripts Retail/Long-Term a increasing shift profits year, of to an This Medicare Operating XX%, network as PBM's dispensing by XXX quarter. driven margin to growth dollars year We improved declined the profit of last XX primarily leverage offset consistent gross in as of X.X%, decline saw quarter. in from enterprise margin to by was operating mainly rates rate pressure in pressures. that expenses reimbursement the margins. D

of excluded shift operating to quarter, compared PDP an year this was less Care to X.X%, expectations, the periods, was the from recent last operating with in we an was operating D PBM of of of a impact segment while reflecting saw year-over-year profits includes The for growth segment The which similar profit the than XXXX. Retail/Long-Term for If within PBM was posted the Care in PBM the growth line Part profit decline QX, all quarter, For decline expect the profit and QX that QX as expected. I've in QX. more profit cadence business in Medicare operating the in we hurricanes. XX.X%, Medicare posted Retail/Long-Term mentioned

our decline operating Retail/Long-Term costs, Excluding the hurricane the have would for Care profit expectations. been within

going net paying to million expense remains $XXX Now, a outstanding. line interest million, interest average to statement, the the approximately debt primarily quarter the income $X the on in lower down in due last year and that from debt of rate fourth quarter consolidated decreased below XXXX the in

was in actually was and in see part better XX.X%, Our discrete by share-based the quarter. during quarter benefits tax what from effective payment we estimate we'd tax which accounting the experienced between of rate our driven expected. the delta the than was This

tax discretionary the caused can earnings options. prior vested call, we is that the rate price As by and of volatility share employees in exercise in both actions changes increased discussed

over billion just average share X Our with expectations. count shares, our line in weighted was

to This also I'll to year-over-year the and with to diluted well the despite year. previous expectations includes this the for our reflecting $X.XX the of up XXXX expect rate for me to year. be of operations anticipated with as takes continuing EPS while of and from in $X.XX EPS expected to So to start per share. $X.XX is tax $X.XX, of of of to as let $X.XX, favorability this results plan the quarter in adjusted that, midpoint guidance the third into turn the GAAP settlements. achieve We top the at than hurricanes X.X% pension XXXX growth of the currently we've range account revised lower defined guidance, $X.XX, now by remainder $X.XX benefit X.XX%, the impact range for our narrowing raised

to website. reconciliation in a You press of on our release the and Relations Investor portion can adjusted EPS find our GAAP of

a revenue billion with guidance guidance Now and to only year, and In Retail/Long-Term a now are script updating to X.XX% our lower PBM we raising comps to net decline of the X.XX% range X.XX% for expectations. Retail/Long-Term of X.XX billion claims X.XX%. top we These revenues X.X%, to due profit months In of X.XX%, growth guidance few segment, to consolidated of range X% to X.XX revenues our Care inflation volume up reflect X.XX%. We to better comps drug Care to revenue segment, the the we narrowing higher to end changes of expect slightly the to script the our claims. in expectations. narrowing lowering to operating are decline flat are current result revenue left and price in growth lower a reflecting and total to X.XX%

profit. operating to Turning

X% current in the volume drug profit better We mix. range X.X%, and are guidance reflect operating narrowing changes the expectations to to to PBM's

guidance We $X.XX. operating offset down X.XX%. and of the us in profit to year hurricanes. effective the operating up we'd rate XXXX, to now range the outlook to the allowing to our range range was tax Taking by on This changes are X% midpoint improved lowering the of to top take to X.X% of the adjusted profit expect profit full EPS the the consolidated decrease for change into Retail/Long-Term guidance operating reflect XX.XX% by these the profit lower Care account, end impact operating

we XXXX. move me remind we timing more profit quarter the XXXX, their affecting the fourth benefits slowly did cadence. you through QX, to In let moving factor of quickly in Before D seeing Part members that guidance, are QX Medicare

we positively this affected XXXX, QX it to negatively QX. profitability earlier, affect said in expect I As

we adjusted QX the $X.XX the quarter, website, XX.X% range certain $X.XX, described to to to operations share of excluding range expect the be to from EPS per to share our be GAAP on non-GAAP $X.XX on continuing from XXXX. is of per expected So of earnings in items share. per XX% in $X.XX diluted fourth up

the the guidance we before a in items. this posted but point me online out moment of slides details find that call, take let few a can You to

the same-store For X.X% quarter, to by be expected X.XX%, revenues sales driven to Total expected we PBM increase adjusted fourth enterprise expect to growth. retail up are primarily are at to X.XX%, comps X% to by and to X%. X% script be down

Additionally, enterprise Day by profitability. Analyst the D operating expected Medicare to in December. said, provide again, timing profit growth grow X%, PBM shift and is of Mike guidance Part And driven in XXXX our to we'll by at X.XX% as primarily

Our the remainder quarter we've evidence this execute that of results for this third on expectations year the year. of our earlier in are our and provided plans the to ability

over past healthy to marketplace. to shareholder growth earnings The position and lie steps for healthcare opportunities us the have to the drive taken ahead that in the committed value. are year continuing we returning We well

to targets towards now back at Day. And over long-term Larry diligently Merlo. that, we to the We year's will last continue turn provided it I Analyst with work that

Larry J. Merlo

destination. the Okay. may minutes do a into the spend in we affordable mean Q&A, pharmacy expectations want about that Thanks, and talking what Dave, move being and a convenient consumer few before to and evolving I

time, focused for of be continues better been point be, been there's healthcare we everyday It making for a us, on to know and and differentiation. patients. At done. pharmacy to more has always the have We same

medications retail terms to patients convenience, local of sophisticated all with the and In consumers we've their comprehensive facilities, clinical on schedules, powered order than of communities XX,XXX serve this pharmacies those a their more all mail across network combination professionals. country built of want X,XXX by and a in

mail the patients services order on meets medications. a of provide needs maintenance convenience that Our certain

immediately. prefer into some this Pharmacy. And However, than medications by way faster patients for a their to group, no there's get CVS walking

stores. mind, five in a some answer It's readily that questions one counseling, to provide states, to And of and minutes. PBMs complexity are and variation clinical connections remember important type pharmacists safely prescription in technology and people we all built to available involvement. despite significantly have that a and get pharmacists' intervention requires in companies and hands with patient's streamline Our also that regulations reduce the with across XX in for providers to time these to in issues next mobility pharmacy also of And issues. today, are with make who to of delivery transportation next-day amount resolved. we doorsteps, are bring patients' will immediate there announcing those same-day unable the or CVS the are with our metro from an utilizing of insurance prescriptions time But be to that consumers offer nationwide both we we starting even delivery. either year wait need our have to And select because it areas, a will

selection curated CVS will in X nearly Manhattan living most stores, to we your products And offer a of for of doorstep. within the XX% miles Pharmacy store the delivery we're and December one starting announcing delivery our for same-day of pharmacy population that X. front also on Additionally, with choice free convenient is of U.S.

And is are investing tools make their to the market a benefit of therapeutically on are patients prescriptions confusing the on all the expertise for help equivalent the it's it easier of our to manufacturer their or savings maximize XX% our stores coupons also to patients less And cost. for concern using $XX in insurance patients further the in understanding reduce less. plans. to and XX% deep navigate each costs know those that important option patients we medication that our than lowest of cost find cost more We patients and to healthcare and we clinical in fill On improve their benefit PBMs $X or average, We patients. And insurance help we to realizing recognize cost coupon-eligible. are with connections $XX providers apply our prescription use designs. prescriptions that

In for a lower-cost alternatives we Adrenaclick, more addition, to to care did we alternative aggressively source generic EpiPen. as use scale affordable our with consumers and make

rated retail than highly reminders in which their patients app text typing has in manage it's CVS mobile set to-date, families And manage currently continue and message Pharmacy At million their times. devices and downloaded want also medications for as digital when how our more as our to when XX million simple been place. one their enrolled easily and have prescriptions app. through receive to their medications, including We enables prompted. to mobile in It the refill time, helps invest XX they all the people properties, same we yes program them our

foundation compelling pharmacy So and I in do think everyday And solid have you how healthcare to expertise. December scale, detail Day. better. with XXth at Analyst plan pharmacy you make to look And on a more our more built been this have we unsurpassed forward we extensive an that's for even sharing to can see even reach a we

up your So ahead it with let's that, and go open for questions.

Operator

Thank you.

first Our Naidu question Mohan Please proceed. the with of line comes Oppenheimer. from

Mohan Naidu

my what deliver in for more location of Thanks can actually design care? your to plan on use Thanks. do taking can way such that stores you store influence vertical comment physical a Larry, the the bit you a leverage possibly that little questions. can think integration to you

Larry J. Merlo

ensure and together, radar standards. in time, thoughtful or in capabilities role the it something of we're think improving care Yes, quality access, and improve it's two evaluating for to that continue always results our home put something And been and we screen providing at whether how that it's that and evaluate of always that same infusion I we very plays. the you MinuteClinic outcomes next. on okay, our the we what's demonstrated that's Mohan, we've deciding doing plays that, role can meets And terms it have lowering those And okay, the cost.

Mohan Naidu

on now? what around more plans follow-up you right the than services to MinuteClinic, that, any you Just immediate have to do do add

Larry J. Merlo

have have. think we Mohan, affiliations Yeah, I seen the And health years have been of over added last with that – some you've couple we have we in services. the partnership we of system where

to who We them been healthy. following we they're of an regimens begun patients, to triage have managing type care keep chronic their effort care, are of that have diagnosed ensure actively to where in an some in patients condition, effort with

Mohan Naidu

Thanks, Larry.

Larry J. Merlo

Thank you.

Operator

you. Thank

line the RBC. from George comes proceed. of Our with Hill Please next question

George Hill

little your on Thanks to integration. the payers? sure Good question. people into Yeah. about Can I'm in taking with infusion about businesses information of how where us morning. with, walk tightly and from you you there's a And more or tightly MinuteClinics to the been think what aligned who versus that claims that going steerage you partner beneficiary I obviously lot see talk question, home you market. lot in for business, Mohan's a it the the story there's talk and how follow-up are vertical guess, I guys the the of of you enhances here different offering? non-pharmacy with. that seen a in could beneficiary as out bit, who and the book partnerships are just integration plans aligned guess, much segments you've different I'm business. the capability Larry, for I seen relates through of you've vertical plays walk between sit about you plans guess, kind steerage use

Larry J. Merlo

plays, and sure room the look retail refer that's overall our emergency XX% I'm design in there examples lower. healthcare Look, if And there at example, I'll as out and start of that's steerage, status, as role out anywhere to treatment the plan at it's are X% many available an simple And offering And some from clients, healthcare for But you and health savings you and where in. respects, of when overall to okay. clinics. the think you costs a okay. migrating some others PBM the jump into about look visits George, you to MinuteClinic adjusted age will that as we listen, an see

when I does variable, become of care think that is a there is recognizing elements look being is on how cost a where the that site focus that we of one delta you care administered. other at

there. we segment in So if over infusion, infusion that a differential in site is know or perhaps the outpatient care an that the versus cost home you ambulatory jump of to in there pretty providing hospital, dramatic an

engagement we presence, and as been able produce that reduced patients And cost. to with at I a that a that customers result, to better and think have can demonstrate fact our lead the outcomes local direct so

David M. Denton

just add it's George, I'd to here. Hey, Dave that.

those is prove been move touch think those all members quantitatively of to we channel, typically channels of when because into given able about now members. have, outcomes that many healthcare in we members we to our we have deliver moving in assets elements If the our one better totality you what

an the that, entry. can in at engagement. MinuteClinics, So on just patient to those them healthcare about they can degree most it's where of the best from And it's or not one, of the always engage number do we how there's an engage is the patients, with then secondly, incentive outcomes the site cost-effective perspective. care And really in care system that point about to best educate we delivery

think improve with demonstrate on healthcare. advance ability journey to those their their two to outcomes improving I engage that our and member components really

Jonathan C. Roberts

see allow Hey, is add The I us to would is designs we this thing X Jon. channel. our only of or into our other move a range offering that patients plan an that George, clients

for patient that be we simply go the So to get home. the at don't one done they access need hospital it can where they can them to infusion, explain actually but to to

talked Larry channels, we that And of even see finally, one the MinuteClinic we'll can the assets. do the of some and for which And not other of there's – with narrowing our an of incentive. to of realizing our networks see reduction them so a and Coram creating so is move copays. into actual plans both about We which patients see they that becomes lot incentives that,

George Hill

Rx call Dave, think softness. my for That's scratching our we're I a guess what super-helpful. Larry the I And macro quick bit either follow-up, I heads would or on little

one seeing mix, to copay to space is were payer it is in it attribute driver across just you soft. is pretty abandonment? be that it design, are intrigued the If volumes it, you guys uptick an I'm trying to design, benefit to pick continue

Larry J. Merlo

tell the you the talked not that see are that taking think as and up. of their hurricanes, little about that look And was we're bit not I I you activity George, prescriptions leading think us patients we've quarter, a seeing in prescribed. because boluses anything if would tremendously disruptive

peak time. periods, any incidence are the at their the look volume. you you not of people as getting During scripts, that in and related seasonal unevenness in certainly some flu I but seeing season cold would flu shots, And the see certainly we're at this say point

may that what some we're be to little of contributing So bit seeing a currently.

George Hill

I the Thank appreciate you. Okay, color.

Larry J. Merlo

Thanks.

Operator

you. Thank

next Please question the comes Cowen from and line proceed. Our of Charles Rhyee Company. with

James Auh

were some performance? on James into Same-store what is us sales drove quarter despite give this the that for Hi, you better expected this insight hurricane. Can than Charles.

David M. Denton

Dave. this is James, Hey,

our on is, I the the channel. important at probably look gross And I'll continued more look profit yield it's those. rationalize what's do across think we've spend sales, promotional important what say, to you as think I same-store at to

and were improve seeing expected, our we the gross in of year-over-year basis than to focus slightly major that a I would And basis. continue profit, have. any the don't on front, out but think certainly was You're naturally better say, I respects. line a performance sequential our we

James Auh

timing the you in great. seems on explain why compared also, just in it D XQ more year. is for And uptake Could compared last the Okay, shift to like side the PBM year? Part to last

David M. Denton

driven Medicare the beneficiaries was by Part of D policy. this mostly So their using rate

reinsurance than in more the position they're period profits so And they can through actually say, either moving as higher this through insurance earns, year. that company corridors, loss as insurance I'll slowly that moved And or a during the certain the know, you during year last what hits benefit company be timing. even

profits utilization, this out of into beneficiary QX. QX year of and shifted cadence that are Given being

sight so of have very And we to that. line good

Jonathan C. Roberts

is And Jon. this

a the add little this specifics, got then by we're seeing initial $XXX, the to to limit was couple more And slower. members less year inflation. coverage so Just a raised that hole so donut means

So exactly Dave those explained. I think causing is two factors what what's

James Auh

you. Thank great. Okay,

David M. Denton

you. Thank

Jonathan C. Roberts

You bet.

Operator

you. Thank

Lisa of JPMorgan. next Please with Our proceed. Gill question comes from the line

Lisa C. Gill

and start paid model. being to Do what very better business Thanks getting dollar paid the on that amount patient do do pharmacist that, And paid had or the risk with you about Dave you see around script risk where versus outcomes, simply want the or have visit? paid? a paid the you're integration how I to talk engagement, paid take shift getting you vertical say MinuteClinic get the morning. in more you is incremental you for it about to outcome to other for model based earlier the be talking or for listening truly patient you is where that, just products, do Larry, to just to some like good of that engagement, much education is own your

Larry J. Merlo

countless about engage years over an that can Listen, assembled costs. with better think which doing Lisa, points improve the patient, our model, with now, of to care, create think but reduce touch so, not business in effort assets a create access with we've we the just consumer, several you that to series outcomes, and fact when you it's Larry. about in the

from an that to of then things. economics point opportunity do So not if providing an other view, there's not we're fulfillment, those

channels. So our we going of share benefit that through distribution one from of

programs, there. begin beginning least at to elements from the of the diabetes process on touch talk Transform marketing, with about of can Care risk, Jon and which that, I heard and of evolution taking going think we're next you've us in the

Jonathan C. Roberts

driver on million sponsors, pharmacy XX as trend medical with side diabetes It and with example. a diabetes. I'll use be the And an to plan both side for and continues that's people

Diabetes Transform plus overall cost. our costs And on the Care lowering so of program drug objectives healthcare delivers lowering

network mix. to the And for as counseling, digital really like cost a we so, diabetes condition. a that provide less, a trend solutions diabetes we depends patients, combine manage formulary their managed XX% glucometer patients guarantee monitoring, to on MinuteClinic through year-over-year then, support diabetes or control help with connected as and clinical our better pharmacist coaching, of well And and clients

We those on cost we're delivering overall are members example the healthcare willing move get channel. lower as as and there, an payers that's where value into cost. to unit drug So, savings well our

Lisa C. Gill

that even it in coming this you you the the potentially about do there market. Amazon's think to of Is value sounds positioned really follow-up, as or proposition And towards why and a Amazon the face helpful. do talk like better anything all geared Larry, think Health just Amazon around it's that's then, you around Okay, well is threat how comments CVS CVS your pertains CVS? as of into could

Larry J. Merlo

okay. maybe ask and in our we're never as Helena your start But and culture, our jump well. – I'll organization I'll listen, in to Lisa, done, in

always to work us need points friction have listeners where good eliminate. to being our helps we're and listening So, think I to customers, understand that we they

think the and we can can we job, serve ways we customer, in always ways for do got lot looking in we we good a better. we're So, a which think that which we've of do

Helena B. Foulkes

Yeah. I agree. would

in a wherever, think, prescription convenient, lot talking as wants. Larry spend that. but add of time the we said to serving minutes whenever is I earlier, wanted and a what getting customer to is XX however less Lisa, she super we about on or And

did us clinical doing so, why we And more experience announcing adding the in-store you what make programs. even we're to great, just But today. see also that's

we the to So, keep pushing hard solve pain points. ourselves very customer

Lisa C. Gill

Okay, great. Thanks so much.

Larry J. Merlo

Thanks, Lisa.

Operator

you. Thank

Jones Our Goldman of Sachs. next Please proceed. question with Robert comes the line from

Robert Patrick Jones

expect as to as some Thanks the impact – guess just a impact curious far this same-store highlight for early, basis guys and just see you if how there costs either all anything with on of those on what I the accomplish of same-day accelerated And Great. then, the the potentially for that next-day is front-end? as any the would products needle-mover needed to might share follow-up it's a this be would some, I this to fronts. timelines? be you but know delivery these from you for can you questions. announcements potential would and from it

Helena B. Foulkes

of experience she her we just consumer back the days by Sure, one is the get some doing need stores, X,XXX those experience It's had and those is and she even long the stores decide, into fairly say to stores, have to what out there. that she it I the we even come saying and forth to best let me her. a there who've we've can make time. home in did toggle think how we do wants small of do to that said, and looked and for days better where delivery house just been we part we start ultimately, would because still can't some really at need and And – get that's for it we prescriptions

we've basically is. our the it's Curbside our So, the whether wherever drive-through now Pickup, which from envelope on locations, patient serving we're delivering Instacart, been We're it's actively she X,XXX pushing stores. with involved

and soon be. so, got experience. it's what a know And is holistic experience I looking the experiences exactly do it's an too for, the us this think of this we add-on But holistic confidence set will is we've know gives to impact consumer to that that her

low-cost sense and a at items. next-day different options, options good some a we've in of we'll have we delivery. per with delivery use side also our free so for pay been same know vary, scale of And consumers willing terms to front for, the of cost we've the But purchase it, competitive piloting, elasticity we been that In be to will price. as do looking cost that a the can to I store maybe will market negotiate able both we and but be said, option think where there be

and So we wherever, review however wants. she think whenever it's that again holistic of

Robert Patrick Jones

following And The give quick an follow-up. last guys you to I opportunity years, it. for just guess a preliminary as used year. a two the XQ outlook Got

into out came cases, guide a in major wait have out. till was as could we it think that Street bit assuming we that swing maybe you for basis? where factors initial should about year, I'm of that ahead little This I December to share on But year-over-year both the maybe look thinking a seemed the guidance. we'll be XXXX

Larry J. Merlo

our December will our the And you – shouldn't read doing we'll both that's heard provide been Well, always you anything as into following And and Analyst what Mike Dave, Maybe has Bob, to be from at it's Dave just I'll Bob, in for and next year jump Day. goal guidance that. start in. and Larry. month, for

that A In next say, of headwinds, some with think that will arrangements lot Retail terms network about share tailwinds certainly talking of start what about, drive XXXX, I'll for as, tailwinds. you would the year. I'll been we've the of

enterprise began PBM and we've the And year outweigh will year season. heard this two you the be savings morning, we earlier this had in that another will As strong initiative costs. streamlining selling the

offsets I this we'll in headwinds a think when – that, see generic talked years. that. to at reimbursement in And pressures. we about probably contributing, point introductions the than continue what last are the role a play what the least to side, we've think pricing XXXX but seen lesser to And extent couple we've obviously, at you of the see On time,

Robert Patrick Jones

thanks for that. appreciate all I Great, it.

Larry J. Merlo

You bet.

Operator

Thank you.

Our from John the proceed. next with Securities. of Guggenheim comes Heinbockel question line Please

John Heinbockel

two, what's partnerships maybe to natural to with a the conflicts hadn't obviously doing then a competitors, with bit lot So, partners? limitations you're year doing other those with and past. it partnered wanted Maybe managing you're last people successfully, working in little Larry, and talk changed I start with or the – you of

Larry J. Merlo

individuals that listen, John, we principle – the or guiding entities okay. capabilities have the we have created grow, grow, that that as of we think with they Yeah. partnering I and

important serve, that can the think where helped create real a win-win create clients we that most I scenario that has partnership that win to a being with customers and we okay.

market. you we've compelling gives pointed to whether and level offering, thought – with and the out, in – about support about we've health see in faster lot that, a can talked that continue that products the in with relationships market. you're a I overall about growing market created Retail comfort the a partner we've a plans the innovation, past. talking the plans, XX the we've – have the how think more for can competitor we how the got in with relationship, Med or seen – also from perhaps how that so, even way on we Med we we've for we that other opportunities And than health differentiated how side, I than space, But think, in they're as us plans through can the And D be where health D SilverScript –

So, the marketplace. capabilities to offer I we're in can create the and value that able with think the we're pleased that that

John Heinbockel

two plan I are this just of those the that and to probably specific probably there. the agree goes one Walgreens. I go, partnerships a And as offerings degree, cost of out follow-up, that you lowest performance-preferred with Because think like providers correct? then, you you a that think Where guess, is plan do more

maybe lowest-cost this one of way market? to the get a the is networks So, in

Larry J. Merlo

Well, John, me let I'll and start then it over flip to Jon.

You've focused while has the on that or pick CVS us say okay? market network now one, for heard been constructs with a Walgreens,

John Heinbockel

yeah. Yeah,

Larry J. Merlo

care as be been be to are we've in may costs. about unit based more right to simply not healthcare or based migrates thinking and about, outcomes, clinical talking networks that affect going value-based on way market the cost going measures. that not performance it outcomes unit They're on ability be the And the through to the to

all is end So, this what of about. the at that's the day, network

Jonathan C. Roberts

And is John, this Jon.

If a of we year. members, diabetes, $X,XXX if the that client's they over that can think are on X%, working you the by the lower have serving AXC pharmacies adherence, just all actually diabetic and and course the about saves

healthcare lower by to So, the market. power been think, being I of the overall has able cost, underappreciated really

even delivers their more importantly, I on outcomes. network And independents deliver to does And outcomes. to it Walgreens high so, will this cost network these deliver with think with and reimbursement calling the unit be pharmacies that – we're CVS, clinical based clinical ability part savings. But performance of

clinical as the add we much providers savings. selected market we've was we seeing much interest as down in capability. historically unit we're because have And So, penetration in it seen have networks But that this best more not in am this talking component, to I clients, believe out as the have we moving historically narrow we path. as cost seen,

John Heinbockel

thank Okay, you.

Operator

you. Thank

Percher proceed. line Please from with Eric Nephron next Our of Research. comes the question

Eric Percher

Thank you.

that and about year? impact material of change Is order contracts XXXX and on and type or out to and even next also that very those we to looking So, relationships the that change there come the in should enter in the seen seems think maybe partnership clear around combining a in returns spoke ability outcomes part in questions reimbursement. for How balance further? way based profit, required between that we've looked the about a have it You profit? cost. partnership you've What's pricing there's clinical lower you've deliver impact market at created the these and any

David M. Denton

each Dave. Analyst I ton point of at We has Hey, Eric, the and something both look a we've you changed. Obviously, these client, for for Day. these that can't of color It'll will discuss on be is it's I'll give We member not this underwrite thought – relationships say financially this and Yeah. say we'll we of both about our how at intellectually – one the this at sure in make time. and for short-term good underwrite. good conceptually, that that one that each long-term. good us,

So, is this disciplined. think pretty approach to I our

Eric Percher

Thank you.

Operator

you. Thank

with Our next the line question Concepcion Citi. proceed. Alvin comes from Please of

Alvin Caezar Concepcion

that a it vision? Thanks harder for necessity scenario, my question. your could Great. those. do that been And that improve your to reach you if there's – down of more with Generally, on PBM business, the becoming more accelerate win-win can could know your share to driving holistic just experience, improving more road, you creating M&A taking for as you But I do distribution vision wondering you've partnerships encroachment is with a a example? channels, backdrop, your as outcomes, to business? you current of doing create view to

David M. Denton

this is Alvin, Dave. Hey,

next assembled assets landscape, X, we how business XX we're really the it about think think healthcare years, really positioned look nicely The those and robust cost healthcare. lower engage I model, into think evolving we've elements you a today And are as access I and here. very provides that critical. if for and stands marketplace think X, our we the members point and about really I think

forward. and as like do look model. we of business, at supplement we has that M&A our to we model always core So, been continue continuing do will our and our the business business to

Alvin Caezar Concepcion

happens Great. migrating may wondering people when switch retail very you restrictive and I'm favoring into what could networks, you when out been And network more option, if past of about a a order mail about how that. allows are restrictive you've elaborate retail have that talked the people those you seen in over? very sizable what talk on in Can mail. have

David M. Denton

channel book look this complete at either at because the is of retail months, to sold-in if volume utilize we and members our mail within Choice see pretty the of mail business out experience channel we've into you or in given move the options Our retail about Maintenance channel. channel, of six the the half utilize when area, Caremark now

for model, model here we're upon consumer unique where what's think Helena this necessarily going best creating choose a and what's about I time. is us the pivot and to at and they're doesn't our or able consistently going use them to choose use what's retail. be period best They're bit, to going a to business them engage for have touched to mail with that of they're

So is in our differentiator I forward. think going real a this model business

Alvin Caezar Concepcion

you. Thank

Operator

Thank you.

of next Morgan Our Stanley. the Goldwasser from with question Please comes proceed. Ricky line

Ricky R. Goldwasser

Hi. Can you hear me?

Larry J. Merlo

Yes, we can.

David M. Denton

hear can morning. Good we Yes, you.

Ricky R. Goldwasser

Okay, great. Good morning.

new a phone system have We here.

up the So follow Amazon just question. thank want you I commentary. on all for the to

or questions to about taking your on you're topic. Retail PBM But just how side think talk from talk partnering Amazon We a a the PBM Amazon potential to the the doorstep. in an about get of potentially really should You steps you we pharma with this how including entry think and lot side them? bringing on about can, perspective? drug about If networks you supply

Larry J. Merlo

Larry. partnering, that understanding do to you question. something Ricky, doesn't you the exist in think ask you we're perhaps working and you them about here – open with that When somebody's the it's look sit certainly If when marketplace, to able in regard. and

– morning from in I can there's lot that entry some saying, a whether today about be the or done. we're and some that that there's us to frankly we're the of think here sitting you've talking of from more challenges doing others and of heard capabilities that terms quite this you're

bring that those but door partnership, the the to at you of may close never any on being would marketplace type look capabilities you today. So, met what in aren't have

Ricky R. Goldwasser

what then follow-up selling and health commercial, in the and mix a of on season just XXXX-XXXX And you're between for terms Okay. opportunities seeing plan, government.

David M. Denton

Ricky, Analyst Hey, something That's more Day. that cover this in is at probably depth we'll Dave.

that I'm So through going hold you to that to until question some then. detail. We'll ask go in

Ricky R. Goldwasser

you. thank Okay,

David M. Denton

Thank you.

Operator

you. Thank

Caliendo question proceed. with line the comes & of Please Kevin Needham Company. from next Our

Kevin Caliendo

have initial Republican how impact it tax I Hey, guys. the any analysis on for CVS taking and done know in question. it's the plan but future? Thanks might my preliminary, you

Larry J. Merlo

type And it's in. folks there, that about House lot last reform and should we've Kevin, and any the going over released of lot effective then Larry. our XX% will tax weeks tax, about more Means the business. as fact or weighs is meaningful talked was that to that comprehensive goes We've a through there Senate the around our week. through say that rate be our version And got days be a listen, to and Ways coming in and the it beneficial

David M. Denton

scenarios at end think the Kevin, day, would being the of that benefiting day. our a at have taxpayer most I profile high just end really given us the from the of

Kevin Caliendo

CVS CapEx, talking way that just of that is now? on even so beneficial terms the work looking any what of – that is one I'm deductions, this they're more at be ways that, to in practices, that some in might on versus or company to positioned be of the the so doing beneficiaries. depreciation at change less through there interest is business maybe and are and about things clearly looking more would potentially you Understood

David M. Denton

that degree on probably that quality our cost. model lower that a model of to and care can our we we can I and business lot It's early we country that. higher expand within there's and deliver think business too say the across have that relief, make tell to more better investments though will rapidly the

of would invest look that it clearly. benefit we So the to and take

Kevin Caliendo

Great. Thanks, guys.

David M. Denton

You're welcome.

Larry J. Merlo

Nelson, more go ahead and we'll two questions. take

Operator

thank Okay, you.

Our Research. next question comes from the proceed. of Mushkin line Please Wolfe with Scott

Scott A. Mushkin

is side? Hey, on and guys. the that that, going cost one-time reserved to partially and fire have Dave, that, asked. them little was to so was A here odds I receivable, the relinquishment of just I a been The ends, some bit. what off lot's try

David M. Denton

Yes, one-time. it is

you about One a states that has think receivable of we've our if that essentially factored, one.

Scott A. Mushkin

gain one-time is the that in so Okay, third quarter?

David M. Denton

it is. It is,

Scott A. Mushkin

of Okay. questions I And a is then, – combination here. this know

you I many, X.X%. rate So was that the clinics, and up guys adding the been haven't growth think really

there your regarding about there's can So on part one us I pretty if I'll integration of business, and on yield. comfort was a small but leverage, And I then it's talk last level thoughts the wondering call. the you been know going vertical then some on. give is Thanks. the what's

David M. Denton

is done to going our that sure that. Scott, in We've one Hey, on a things, We've from as us. we very that. no perspective, want We'll as is on want leverage sure about say, we target fully things. doubt across I'll couple We And growth two, really geographically, A purchased the that had we're been you to Target Dave. at system a enterprise. the sure moment, pharmacies, committed at wanted we we been locations, At took up due expanding our X.X somewhat point around X to We've perspective, And bit, Target the that that. our know, a to forward. get within very a balance from it's times. we're ratings to perspective. EPIC sense very running to clinics managing the – we time, we rate important There's pause clinics over-levered that. hover make this the on and focused sheet our back times. in make of make trajectory from then One only fully clinic a integrated two and are the

over out our obviously, and periods. to begin delever several over that the grow of next is to we'll Our objective, time, way

Scott A. Mushkin

subject downgrade? Would made you deal ever a you that do a to

David M. Denton

in best really the It's point speculatory for it question. We do big term, and business would actually investments evaluate to what's us transaction our each time. at a we right on make model long would

Scott A. Mushkin

the and say, guys. one-time that charge, yield. then of I'll definitely And size Thanks, then,

David M. Denton

It's immaterial.

Scott A. Mushkin

Thank Perfect. you.

David M. Denton

you. Thank

Operator

Thank you.

Our Please Ohri-Gupta comes the with Barclays. Priya of question proceed. last line from

Priya Ohri-Gupta

picking access just rating high to for the commercial well to the last access guess, context talked as so BBB Great. in you've I your as bit, in. question important paper Thank how the market sale-leaseback the you the on little a in Dave, about me that past, market. much of up squeezing is

the access a say, within time off, have if a trade flexibility willingness would long-term for were BBB paper more gave short Tier markets? sort strategically debt the you in X the to greater just commercial around think spectrum, If of they you you there be access to

David M. Denton

and focused targets rating, leverage we've with not that, BBB high that established We're X.X on We're that's consistent focused Priya. at our times. maintaining our on

not of as what this point. focusing that's on So we're

Priya Ohri-Gupta

a you've funding sale-leasebacks? just bit. for Can been quick Have you market? the private Okay, primarily using your talk and like you've then a the little been you how about from follow-up. XXXA looks It market been absent

David M. Denton

low sale-leaseback kind store just will, acquisition, we with offering if our at that a We the time. back, this Target pharmacy we've – you in mind on scaled of a in have development program organic been little point the tad. Keep

of decision, So, that business anemic. sale-leaseback because offering has the been relatively

Priya Ohri-Gupta

right, you so much. All thank

David M. Denton

You're welcome.

Larry J. Merlo

Okay.

bright time Monday any and on up, for follow-up appreciate if is just has McGuire morning. early anyone available Mike And we a wrapping So, as items, everybody's well. that

and next you month. thanks see we'll So, everyone

Operator

We Ladies and your and disconnect you conference does call your that line. you conclude gentlemen, please that thank for the ask for participation today.

CVS Health (CVS) 6 Nov 172017 Q3 Earnings call transcript