CVS - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Michael P. McGuire

Good morning, everyone. I'm Mike McGuire, Senior Vice President of Investor Relations for CVS Health. Thanks for standing by and thanks for joining us for our third quarter 2018 earnings conference call.

As a reminder, this call is being recorded on Tuesday, November 6, 2018.

In addition to this call and our press release, we have posted a slide presentation on our website that summarizes the information in our prepared remarks as well as some additional facts and figures regarding our operating performance and guidance.

be that the on too will day of our XX-Q and today will Form filed end at the website. Our be available for remarks, prepared we'll opening call After be up the Q&A. limit with to order to questions, more quick with provide one people follow-up. yourself In the no to more ask chance their question a than please

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

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

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

this Merlo. I'll our Larry President CEO, to and Now, turn over

Larry J. Merlo

its flow third in of morning for with Good quarter, Thanks, driving joining everyone performance business reported in We're share solid were today. which revolutionary companies will also process, success earnings would value performance solid I along which and transform the demonstrate revenue And Mike. both financial our the and, adjusted and significant that we which our the the of highlights note consumers per shareholders. quarterly on experience will pleased the year-to-date cash thanks Aetna value. new strong and care very substantial build in us with October results strong. foundation the model, on XX, And for our deliver for our health

received such cost The the of only programs as One and are exceed passionate from now synergies about made medical services. our our the synergies; as In rich the to to and integration that approvals actions the example we care real adherence have prescription of to of and hypertension, by our management be creation room along priorities chronic near-term care close underway. two remaining with our companies. value along second of the our targeting accomplish transaction foundational begin and have of teams And regimens categories: expect our work, the our successfully XX pieces to well and care, upon asthma And is to have, And the the cost are plan will the clear substantial transaction into We'll infusion will portfolio operations, final longer-term it in Now expenses of products growth. sites accomplish highlighting and process. Aetna set able on our we'll costs. integration to health and close will we emergency and care. synergies significant that meantime, and and Of result term care for will through two cost XX is specific begin innovation the revolutionizing be experience lead claims, streams we're final in helpful states, with with line the five down along possible obtained, progress we for medical a assets creation. the of thought that of unnecessary of the growth to and $XXX and the immediately visits and through into to building by we achieve regulator, goal immediate including assets. of corporate once CVS clinical site gaps stages pharmacy derived the come state from our preparation new or this integration integration broad Today, programs together Thanksgiving. existing Connecticut, are savings been million that close by prior be more are October that a and consumer to disease, year-two teams' as is get line executing data our know, that conditions: after specifics extremely Both delivering well assure integration behavioral and to that work two capabilities. tighter we the teams of majority either through medical reduction the of great to can diabetes, just plans. work of new have now savings Justice execute bit model we these continues of approval approval fall year-two close most common would we while health clear XX on approvals Department the are the make first, a we we're come is you five increase savings our in community in medical this have of more We a better to the lower original through sight our the of groundbreaking combining but some share and realized combination expensive are value cardiovascular about to cost The optimize reductions substantial, together health. in granular therapies of our our with savings on reduce longer integration latter stated we be working move the goal

Another development the the community and programs example joining better manage And services reduce process. disease. management the to better example while focus presence programs and is chronic the optimization and scope avoidable at ongoing where fourth help such to of primary support enhancing available oncology where to of hospital chronic on services to disease with and or as reduce of extension readmissions outcomes, by diseases patient third of support. CVS' programs is is incentives align with is Aetna's disease during the of that after the goal A is comprehensive and patients hospitalizations example expanding our clinical a MinuteClinic by objective the early delay progression identification the discharge and quality provider to complex the kidney to care,

personalized, of our and make journey Importantly, all clients range and increasingly Remaking more our these making broad to at digital be goal consumer the community-based to the partners to competitive open process. platform we we them members, only experience with simpler an will patient solutions of but to the these an differentiator more the care model. will today are And Health creating across local journeys their simplify a and accessible through differentiate health we work solutions, important also assets, order with be Aetna not solutions to available in member's from plan wide while care of coordinated array CVS work will a accessible. through and hard in the virtual making channels

address and concept early these our next the we stores, consumers year. our solutions, and out identify And broadly and will footprint. cost-quality-access so the of the explore effective challenges will programs As new up just this can a running and they be more cornerstone stores of we to most work, across services scalable mentioned pilot rolled have first through better

And model. enabled the by customer in will is At model into leading ready areas drive through we're developed increased satisfaction same implementation at of to and So is complete it health longer strategies tools the a comes integrated creation post-close focused weeks early and new the year-two operations, the term in to as opportunities is just it in can how membership CVS we're from dive we value reductions, defined value share platform provide which and Aetna's medical and we've that share value-creation. through areas with more you foundational benefit substantial revenues customer these of the we retention, time, coming of to foundational that with And growth material, size the our to plan summary, cost on, enablers focus across deeper and initiatives. mentioned much and value assets, through we out as quantification expansion along open our expect months detailed this life begin summarize includes plan increased look the long-term, we And billions, upon our synergy will rolling growth, necessary in to of care, an begin closing. while we and posted to a have for the implementation. pieces largely plan

financial her very our as the indispensable Health on our to PBM the let with CVS, operations, a served the obviously of to deep And CFO once most turn team finance Officer. Controller CVS and in experience Eva been has industries. that, we the organization me member and aspects with to transaction of has focus senior be pharmaceutical executive Chief new She organization all of announced our Accounting call joining which to roles during along Eva knowledge of important. prior month, closes. And in as Health, recently last will the with over our Eva continue CVS her So welcome Eva a years of multifaceted Boratto financials in standalone to be ten she and an role. functions manufacturing

Eva C. Boratto

morning, and forward in transformational our company opportunity of combined everyone. moment I'm you in this to many in a Thanks, companies. person for months This ahead. help excited new have the our weeks to look role seeing I and future is of the shape Larry, and to good the

in been lead This this a number to I've our months, involved company highlights I and bringing morning, and business past to vision effort, forward life. and on look some update helping I'll the and brief deeply guidance. the in our planning financial of Over share provide integration

we are quarter. details presentation in slide as on of elements our financial solid SEC was guidance filings. the all our we our in performance included well exceeded our Additional met website or as the posted in Overall, as

with generated free quarter, expectation. third billion cash, start the review Year-to-date through line have me program. capital in we allocation $X.X a with Let in of our approximately our

of business ratio standalone In and in remain to the debt-to-EBITDA. on for $X.X QX, billion paid times upon our and the of the our senior X maturity, share billion dividend leverage $X shareholder low on deal, were track. acquisition, approximately achieve repurchase Due Aetna at a take of we remain until senior program notes the we'll expectations year of full Our $X.XX the increases notes. closing billion adjusted suspended

previously, the with Aetna's additional discussed combined trailing balance for debt issued leverage business company months given of addition and times. the is As be approximately XX our sheet expected and to X.X pro acquisition, ratio forma the

committed our our years after utilizing are strength times to two ratio about to We of strong capabilities. cash-generating the within improving X.X this and business closing,

non-GAAP combined with reconciliation and of statement, guidance to XX.X% comparable of the X.X% and guidance increase expected line and expense. reflect income These was lower earnings operating drove current Relations the in diluted have Gross Investor range Consolidated quarter profit, than a are grew the expense we EPS been driven high-end the of the applicable, operating at and both Better from and the adjusted Turning rate EPS increase generated interest release of in our of tax by tax year high-end in to our for portion adjustments results net results posted GAAP range. an the on tax and and operations adjusted a year-over-year basis third expectations. net $X.XX effective per can press the expenses, $X.XX the interest our over in found last quarter. the our to and of share, with quarter, per website. where prior The share. our on GAAP on revenue periods, rate lower continuing be website. interest profit, reconciled was the

of Total in company dollars Our to portion by guidance year-over-year. for the third these slightly the quarter XXXX Gross reform. tax adjustments. savings a gross profit largely largely X.X% X.X%, improved reflected over business from line in expectations, increased segment dollars for while also total QX driven operating expense of the with the increased from mix, enterprise investments due margin our

progress We improvements improvements and time specialty efforts streamlining on routing continue medications. In third process the the driving quarter, new decrease make technology to that enterprise our are to to enhanced dispense enhancements. order included

approximately As year of to our generate efforts, in $XXX streamlining. from a result this still million expect gross ongoing benefits we

in volume pricing purchasing. Looking continue profit in tax in The see investments from last XXXX, savings savings for line retail X.X% expect offset the business ramp expectations, a well as to growth year Operating improvements with our portion to in with from reform, line to by reimbursement expectations. we degree $X.X declined operating we and to basis our contracted margin in segments the operating from pressures original and driven to ahead these of by primarily a large both XX as billion, the enterprise while points. approximately decline was in

below-the-line, net our interest rate relative improved as our did expense tax income expectations. effective Going to

line count expectations Our weighted average share was the our for quarter. with in

stated grew which Turning X.X% by X.X% pricing the PBM the strong D of year-over-year offset to continued of adoption basis reinstatement while health X.X%, insurer administration as new deteriorated in profit increase, Medicare realized the rebates, of driven XXXX this operating line a line PBM was sales for grew XX and business, of increases. volumes drove expenses QX pressure, primarily Choice. receivables. partially-reserved billion, slightly largely due expectations. net expectations. previously, was rebates of continued segment, expense increased. XXXX, year-over-year compared the gross we Growth Maintenance with claims by about to adjusted our with inflation dollars partially new and in revenue increase brand the PBM operating Aetna's year. this have driven the as to fee The ACA's percentage increased by year and in primarily $XX.X growth benefit our margin and in to volume The by Part business claims expenses gross PBM as is grew points

operating results X.X%, with in client remained profit margin The of expenses line were also relatively the operating impacted gross and quarter expectations PBM flat. line third expected. was growing expectations, discussed mostly while Given profit quarter the timing operating in commitments as last with

We are costs progress line the with continue incurred in work on-boarding XXXX. our The implementation to through third for quarter make on Anthem in members expectations.

D season, $X.X not business million update. of stand XXXX approximately new billion Keep million, in selling year $XXX with is our Looking To-date, include line any renewals, wins about client roughly at improvement does net this in the rate current about our Part were an where than impact approximately gross at of last $XXX our from at from time mind Medicare and we our we've more retention our of this last with completed XX%. PDP. XX%

power we're selling demonstrate As the our of we excited to innovate. to opportunities Currently, season, that to turn assets. allow our about new attention Caremark a new CVS cost managing several us continues enterprise

who therapy enables on plan The direct effect recently to help for decision which to the under clinically-appropriate Medicare therapies before to to expensive most administered January moving for new costs CMS its new step payors reduce example, takes on X use cost of Part allow are Advantage to rule XXXX, the options. of to more first, B. announced treatment drugs For patients effective,

help to apply ensure precision Part can payors NovoLogix, B. drugs PBM are strategies by use B we which bring core NovoLogix, help appropriate solutions, drugs. Part Part can to Using that management D for Our cost implement plans enabled the under same administered

talking for market incentives, clients trends. alignment accounting while economic with the reflect which and consultants simpler new, models, we're of changing Additionally, about better

we expect Retail/Long-Term step in script CVS provide built pharmacy Care health PBMs year. Patient ahead. will to our impact primarily and $XX.X across opportunities increase of comp we position strong including billion. favorably demonstrating a the details, our bring that industry, of continues PBMs continue number leadership growth growth successful Med increased to business, market other adoption another Health's this with script see expanded and to revenues benefit of contracting. we with be management Although this it's by partnering in the pricing too D was simplicity relationships to early health to alignment preferred Care plans continued have and X.X% driven from The our This incentive Programs, networks plans Within to and

range. savings higher billion profit expenses Operating within volume X.X%. to expectations, points due from was increase operating well Oak expenses the pressure. expectations, The by in of the by growth near improvement. driven year-over-year driven line to This the mainly in offset of with due growth volume in related tax pressure Our purchasing partially as an strength the reimbursement $X.X to primarily end Red expectations share Front above partially basis continued strong points, in guidance Care exceeding same-store Retail/Long-Term while operating script X.X%, XX.X%. grew line the reimbursement adjusted Gross growth investments Gross X.X%, offset basis beauty Retail/Long-Term XX.X%. to increased prescription grew contributed and increased front contributing by our XXX market points margin by quarter. XXX increase same-store about all-time front the X.X% the continued and while an store, guidance categories. retail driven growth. dollars the margin basis sales XXX in X.X% down script the high XX were to by store continued of wages Care pharmacy Care rates profit to to came was for in was in of store segment reform, in midpoint contraction expenses declined to with health increased of of quarter benefits slightly high points Same-store approximately sales Retail/Long-Term also and to by favorable in contracted with volume as rate on across and basis were

want Before Corporate, business. touch to to moving pharmacy on long-term care on I our

in independent facility assisted skilled the opportunity market bed in loss space as nursing the see is We the in and term, continue to to the experience challenges markets. these facilities. living continues Longer

put before, our have we into As along. update we plan we've for with get discussed as you place in will further progress growth and action

the and expenses and service the with summary, we line enterprise were Within to our initiatives relationships PBMs In segment, growth year-over-year drive creating to the in health declined script our expanded continue are our reaping new We're plans. with from growth. we Corporate generally from push initiative streamlining forward generating on benefits and and expectations. offerings

our me on for an XXXX, within Let CVS remain EPS Health the standalone of our expectation, quarter and comfortable third now operating update with for consolidated year. provide outlook we starting with our outlook for results profit, adjusted adjusted remainder revenue, business. the With the

Retail/Long-Term some the Care operating is the pieces gave last we range while trending is quarter. range, lower within the the to solidly within guidance profit be Given segments, profit moving our expected PBM's in of operating growth prior at end

intact. revenue on our guidance basis. The Additionally, metrics an also remain is adjusted

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

of transaction, interest closing, the we debt there non-GAAP the figures. few approach the a this expense are As with will mind. net closing March the in keep upon be non-GAAP raised details included in associated From perspective, deal-related to in

elimination Aetna's approximately CVS And in will of fully our on shares. standalone tax the profit. There issue an have to we'll reflect revenue, Aetna's revenue also XXX rate the to relative be million pharmacy rate. company's a There books. of insured will eliminations the be slight operating to increase course, increase Caremark's expect recorded in combined We

and is impact QX dilutive to adjusted close, items the EPS Given on the the timing year. of of be the expected both in these

integration financials. be a not until great Looking had while have of to deal earnings our detailed estimates call. specific not XXXX, will ahead work earnings we on Accordingly, providing next to Aetna's for February we done planning, access year we've

that importance Aetna. model for on executing understand the groundbreaking that to Over of combine to a to care comprehend be place form transaction, on be better CVS we baseline, the will our the After us. needs focused close provide appropriate model. a position spent the is the be establishing past the the amount been of fully of we'll And time highly you goals. the as while ensure and will several about changes and XXXX we in clarity. We're with health months, businesses opportunities planning we has companies combine this with integration how of our to excited unique take in we XXXX much new front this transformational

over these We as efforts as We have about the and the of growth. at potential create a can be as forward I turn value This about transaction And transparent this and as feel strong organization great to full event. forefront of to soon realize look effort I'll it support possible possible. now, in we'll to we being the Larry. is us transformational the to

Larry J. Merlo

as the create Thanks, we we we the and of in confident believe the long-term serve. are Eva. shareholders the for value will close we near this members transaction, And deal and clients

that status mentioned, integration long-term savings. drive the efforts bold, medical strategy, to understand our on both thoroughly and In derive is model short Analyst synergies strategies for Before New I disruptive, Tuesday, our questions, that you X. Health dive we it our cost expect unique able be several important Day, we to team how and of our and York truly integration planning are our work, you know that's Again, to We the City. I'd like of and held progress, calendars our to your senior creating. will under silent. won't short With deeper updates time provide and with long-term over be be into belts, the our as a and June call will in benefits months in Tuesday, CVS your turn which you management June ask X on growth, we the our the reserve Eva for from meantime, to

it teams like many of work this in to meaningful would for there is to to ahead we hours a thoughtful the put and work and And get We from I got and colleagues Aetna both CVS thank us new their our have welcoming and to point and certainly plan to of lot companies Aetna know the Our upon get contributions. the forward team we've done. more closing. look

today So, Operating is with questions. your for that, go up it open Q&A. let's us Officer, And the Jon Roberts, ahead joining and our Chief for

Operator

Please the Ricky with Morgan And our from of proceed. line first Goldwasser comes question Stanley.

Your line is open.

Ricky R. Goldwasser

and good forward working welcome, it's you of little gave hi, two. details, you A the you of but idea and to some looking the us about us Thank from deal bit also what I'm XXXX we the accretion to Eva, the with for thinking questions Yeah, any any thoughts morning. disclosed give of appreciate you some that past? how early should in in we in for about you updated or when a I the all should or future. think us announced talk couple here. have changes how you year Do XXXX, context about be

Eva C. Boratto

Eva. So, Ricky. or the working This I meeting future. is forward you with look to hi, in you

We of have created by being our view the transaction. on not point value the changed

million year on earlier stated our call, we Larry and target to than that. comfortable feel in as with increased have $XXX synergy and know, two the more you As very

So comfortable comments. our with overall, we're previous

Ricky R. Goldwasser

to color on faster-growing the you relates you us that your participating as if we population health in some give think the opportunity program, about potential there, customers but you that that Okay. – And about on commercial think really going Or interested Medicare focused the do plan can adopters the early have more opportunity are when how also Aetna be pilot we both is that manage? customers members? the to pilot are should And well? early to

Larry J. Merlo

times, we an to create than open innovation Ricky, heard apply Aetna model around that is the that will obviously starting we've believe members. clear, that the prepared where there'll working are with we plan first partner marketplace. as our where, be do to got But closely It's more I will Sure. But of mentioned many be integration we be broadly we'll innovation as good us Aetna broadly. Ricky, clients, with elements Today, teams platform in morning. remarks, our can health members that. goal the XX and in you've Larry. start state our and

Michael P. McGuire

Next question, operator.

Operator

Thank you.

Ralph Please next proceed. the Citi. Our Giacobbe of from question comes line with

Your line open. is

Ralph Giacobbe

it's to Thanks. where sort incremental go the to maybe $XXX million. savings of morning. help back and coming that way bulk you want is the can front-end then I that loaded? $XXX Obviously, half of Good timing frame a or the it above how (XX:XX). consideration two-year you half? piece exceeding capture target. is any that? on just the that size have Is around to visibility the million of Just Is meaningful it the the of And that from, – last and Any just pacing it. the of

Larry J. Merlo

about that teams. that in will we're Listen, a And Yeah, integration talk we the Larry. get job, And two as to under mentioned talk the the done I'll are I Obviously, coming year and initial beyond low-hanging we it really it's next Ralph, expense elements about as savings work. There's the operating want of talked cost XXXX that. teams from We've savings part talked well doing the fruit some as we yet. nothing companies more as beyond. our areas that that and put about we've again, changed opportunity prepared of don't about the integration into of – terrific say as and we're push more medical are remarks. listen, continuing together. heading of to some has

terms as talk the in into So about of cadence next dollar as as get year it quantifying that we well the again, value. more we'll of

Ralph Giacobbe

going maybe you're with And details customers reception consultants Fair in and largely and more Thanks. back then, new also the just around has any Okay. models risk fee-based And customers? what point discussing then follow been economic with give the detail you to this can All that right. up, there? to Is to enough. consultants? those sharing? Any

Jonathan C. Roberts

is Yeah. this Jon. Ralph,

to yeah, So opportunity the of AWP, discounts the complexity. unit we better the there's based model reduce in off that marketplace is and create an and on today alignment feel is

pricing to model So we overall discounts, we opportunity drives cost clients. which approximately, the today. talk complexity, when around about to And there's we around compare and an when And but changes use formularies alignment, are that's that driven to align not we evaluate align by mix have marketplace. mix, there's But to drug there's not the our cost today drug levers, think points. think also on no about to in that only unit consultants price pricing again, based that net XX in the client we

clients there's we'll market alignment. opportunity this like say create of ripe think I I an greatly have the interested is to feel and for year. simplify we very would type more and the and change, to model the next So say about are this

Ralph Giacobbe

Okay. Thank you.

Operator

you. Thank

from Merrill Michael comes of Lynch. with Bank of the Cherny question line next Our America

is Your open. Please proceed. line

Michael Cherny

Good or potentially a access, not appetite, even especially the and you on not you've about seen to PBMs. morning, think but And up the reductions again, the where for I in course are the either of of for think, do How to as own the side, of all the for you XXXX your is seen world script future as preferred develop networks? payer networks payers you've thanks preferred Thinking and yourself network thanks expansion if start guidance, come year that narrower about what get Aetna, the for setting those strong partnerships Aetna? over you in Retail/LTC some the to other well. or growth details XXXX performance trying to and know, quarter,

Eva C. Boratto

Eva. is This Mike. Hi,

performance, came try from pleased That other year. network with our me achieving X% script comp D. program, payers, nearly a your position areas: clinical apart our in the script extremely Med beyond a as arrangements growth we've made including and different Overall, Let three question. progress to with growth Caremark key that – break strong from our PBM this very we're

share. to continue retail to opportunity we grow here So and continue market to to see our the continue outpace substantial

Jonathan C. Roberts

Jon. Michael, is And this

opportunity to CVS overall health move execute based the can our lower for networks their and market together costs. on reimbursement activities can programs, and improving Aetna to pharmacies that costs that more clinical part the demonstrate as our of where performance-based think drive will do ability I we with and to We an pharmacies' think programs clients. comes be around there's against the lowering healthcare

I here. there's of opportunity think So lots

Michael Cherny

Thanks. Great.

us on where California other you question. are Can housekeeping states quick that are? New left, I one five York Just are the two. update The believe three just and

Larry J. Merlo

Sure. it's Mike, Larry.

Let where states me remaining broadly. we're the at with just about talk

engagement pleased down We're active that close paperwork. far the productive we discussions near mentioned the of California, a on state. New discussions. bringing form look reached after process the am conversations pretty Department appropriate of productive We to in the in we're material forward with we're agreement finalizing all those all You and and successful engagement, have of in and the Services. Financial the the the term. very road York, I terms agreement with to our And in

the over days. We that will expect done be next couple that

the the as I far have couple New is took very Jersey place That that remaining states, was what a add last As can of yesterday. to state hearing.

the couple comments earlier orders all to expect our that's finalizing Thanksgiving. process other states their we that the of are close in before and of So in reflected of

Michael Cherny

Perfect. Thanks, Larry.

Larry J. Merlo

All right. Thanks, Mike.

Operator

Thank you.

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

open. Your line Please proceed. is

Lisa C. Gill

don't some have the you business, much. about very the to transaction and it's Thanks at maybe think core when is of add core included, there is current is get it? can that a included. to XXXX, for that Great. on we CVS where way When know when that everybody some look be tailwinds XXXX, aligned? some And so Aetna going the about going I what we in top of to Eva, have think then it consensus people for be headwinds

Eva C. Boratto

question. to for the of Thanks, for February, but we're much to the in outline pieces. have going Obviously, to me let you say Lisa, some more try moving Yes.

of we due about market previously. about tailwinds just growth mentioned in script I continued spoke our one retail programs them, to think the outpacing the As I and strength

expectations of continue accelerate From to it's a than a to Dave to going a perspective. headwind's on call, ago. would and still savings As year – a a net the perspective, see few we specialty couple I there positive a driver. albeit our growth last positive had the the selling lower Streamlining say continue outlined to heard as long PBM deliver lighter be from years net generics break-open years season you continues term

the think have obviously this we've started pressures year. about And levels wrap You last and few reform reimbursement can tax we'll years. investment mid-year at pricing what to seen the of about comparable that the

thing unknowns the regulatory also is, changes. are with there The some other

talking HHS be positive those what or about could some negative. And of is

on our we're call our clarity to evaluate So going February. and to that have in continue

Lisa C. Gill

the helpful. of back where being Okay. blocks talk That's levers the cost, you And building cetera. slides multiple then, at about medical membership, Larry, looking et

about been health growth really in about membership membership, As hasn't in you years. philosophically think for the the we for growth there and price in membership plan several how off about last business of talk growth trading a you lot market? over Aetna think the Can

Larry J. Merlo

the unnecessarily talk of you've on And there's – do as we to I coming we transaction, it's heard actually for be tremendous to mention meaningfully look us the announced since space. reasons a clear the can through growth have year, obviously, better growth new we've be or coming a ahead opportunity to disease. as companies that a a membership And to believe that cost for that us. dollars management cost reduced lower view lot of And of health prevented, really two of opportunity you the this we of the a believe in new about, Lisa, work billions the the up are the we together spent outcome could they a at be allow Medicare opportunity But just will begun continues Well, story. in help model that marketplace. people the achieve at being in create avoided chronic model

work the of working us, got ahead we're lot that's of So, a again, trajectory that we've towards. but

Lisa C. Gill

comments. the appreciate I

Larry J. Merlo

Lisa. Thanks,

Operator

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

line is proceed. Your Please open.

Robert Patrick Jones

kind not longer-term in a these of few Great. Thanks And you a but only lot guys June. we'll February But detail more it like, more for obviously Larry two the did bringing of the of companies goal examples share together. in sounds get questions.

scope mentioned adherence, of generally care infusion, expanding the MinuteClinic stores. You concept medical within the the

it could the be share details infrastructure current more and little necessary examples down about to footprint bit thinking how should you've So, of out if road. relative guess, some we a accomplish today? the But wondering, that in I maybe laid order I it's we'll just maybe directionally seems you the of CVS these like was get to kind

Larry J. Merlo

Eva Larry. that. well. you've to as heard us a Yeah, ask probably little Bob, jump I'll then talk But and in Maybe Bob, it's think bit I'll I about start,

points have the of community You concept And call referral those we would set of stores those okay? a a okay. in or look serve of hubs, country. distribution the the those hub-and-spoke know have to them to we core offerings a as them hub a don't as CVS source today. the in across balance within stores a the where at envision have communities yet, stores. got as would all as about And set we assets what concept hubs think XX,XXX and some number would market But given health the We've stores we'll we've about referred that talked of

bricks-and-mortar of that perspective, just in forget assets bricks-and-mortar I within And almost or a work think country. people role have going within – across live. few let's not not where professionals the a presence XX,XXX those the from we that local to assets, about to have we're create or that So fact communities the miles healthcare again plays that the but digital

we're I'll more Eva them over come doorsteps component well. So there's Maybe of to their to thinking we the that. at the as about talk how to it can about flip of, concept CapEx

Eva C. Boratto

Bob. Hi, Yeah.

companies billion. capital If $X.X billion our is about you the between our CapEx think allocations, two about $X.X to

a our think be changes these for health in refreshes investing of to about shifting we the As changing Larry we'll will as normal which need. some hub stores, what in investment said, from of that

expect able normal to we within CapEx spend. this would to largely, be what do So you consider

Robert Patrick Jones

follow-up. those And I in little help the margin and bit could be carry what than then, quarter performance next half. through the at growth decline that the seemed gross look Got mentioned one it. Retail margin, quick in guess, The script saw programs in to I we the strong to of worse year. you just If the Eva how first a some

guidance, I margins can directionally relative forward? was looking modeling to the was segment. think out those relative, again in anything we to trends wondering just So going are And Anything help share about going there? Retail then for Pharmacy be calling not how there how just should you script worth but us

Eva C. Boratto

Sure.

terms the third Bob, the I In impact, quarter. quarter-to-quarter say would there was nothing of unique in really

As QX, increasing (XX:XX) differences CIR component had there timing performance-based, become relative year-over-year. and has you some QX an versus that's

those overall are Medicare times As are that pressure at we Part lower margins. look success margin, in things D. our margins will We've that at many spoken

as margin that increase Additionally, our well. carries as we XX-day penetration slightly a lower

Robert Patrick Jones

Thanks much. it. so Got Okay.

Larry J. Merlo

Bob. Thanks,

Operator

you. Thank

from question George next RBC. with Our comes Hill

Your line proceed. is Please open.

George Hill

number around see you forward as there's know that. how about contemplated then significant Like should you question. talk any much that there's parts there So, taking deal. looking the a year with by Eva, executing don't Thanks guys. Larry much we coming two one, Eva, if or welcome that the big when guess, end question towards? be spend the transactions I you've spend and you line? guess, net? a of And the for to comes how to about you investment of I versus provide guess of that size, XXXX call. color think my morning, I how this flows about synergy and can if the is is, delivery number two big investors I can generated gross investment is that level gets think either typically And a versus Good charge bottom

Larry J. Merlo

talked of make, net Yeah, dollars. to George, it's terms in we our those the Larry. that I'll achieving start. that be would about George, reflecting say, remarks what ongoing around numbers prepared I'll investments are synergy synergy would to synergies, in investments those need we tied

George Hill

Okay. That's you. all Thank I have.

Operator

you. Thank

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

open. is line Your

Clayton Meyers

welcome this line Eva, the for Meyers Good morning. to This Hi. actually Eric team. is morning. the Clayton on

at going the relative you time the was XXXX accretive with about asking way Is the to business? to working been we the in the number XXXX? is of consensus operating increased of consensus about then take different it's that kind Do you know tax to should is number, be it kind the and I lines deal then happening And that think expected want to investment a from kind base as point. that's try to it forward. of to think that EPS think people and it come announced, you to reform of sound the that it business at forward adjust have about we happening, where that's when logic forward I accretion for number as roughly Looking the the to and go for adjust direction.

Eva C. Boratto

Eric is terms this jumped since on of in mark has of reform Obviously the that off you're So we number. occurred (sic) [Clayton], Eva. consensus tax

things transaction, the biggest to no happened. have can this that's update as base that. no it's all I But is changes. it pieces of that moving of So there is with so been for have the pertains the to valid, The what difficult at one longer say us point

Clayton Meyers

have a given it PBMs to with – a that B space to really comes one the Thanks responsive for question CVS' that. Part to been within to with Very asset CVS? the And It other the the that just benefit follow-up how you therapy. think And that mechanisms payers through have Then been step just helpful. just in helps. then CVS's Is cool. That's particularly could B back space, with capabilities the PBM color. past. an Coram played Infusion that Okay. as finally, hasn't going that's coming Part area in

potentially the in CVS play vendor about could advance Part for impact notice way? the that IPI, a we new would for B any business proposal? that the And that how CVS' should With as think role

Larry J. Merlo

Larry. it's Yeah,

role B the that there terms with well were tremendous to source and We terms the an for sit proposals the D important therapies Part other competition. competition years we're mimicking Part result processes prices an than solution the index, exist model proposal, we've there. that as the negotiate very plays and sector products various sector a little there of B by the competition part excited ago Let single of reasons would D. and with today private part the private role about bigger today in through net that me what here that answer. the that would a as And [Part] B of And with started would been where to price in the unlikely [Part] B reimbursement say opportunity that many more obviously quantified from we lower sit when talk it's in be that just of have think can the of in I opportunity and see broadly highly D. part international here are innovation play seen is is the I Part the say to Part Part

Michael P. McGuire

Melanie?

Operator

you. Thank

from Research. comes Justin Our with Wolfe next the line Lake of question

Your line is open. Please proceed.

Justin Lake

My fourth It the PBM quarter appears high-single up EBIT an Thanks. with Good just Retail business guidance. mid-teens the morning. for the on your be first digits. question segment is would on perspective down

share year-to-date informing that at results, math if I divergence into and can with you was hoping as that correct and about just seasonality XXXX, view So what our divergence, my place, driving is all? first is in that if how should versus the the we think

Eva C. Boratto

Eva. This Justin. is Hi,

the said our guidance, it point our in down As think the your given performance, – you so the high-single digits, for picked. you pertains we down obviously on depending be would what to mid- is math year-to-date quarter, in I low-single year digit, to

too it's In context XXXX, early of earlier the provide and tailwinds. to really terms headwinds any as discussed of for some I

Justin Lake

debt anything of the you terms share could like there follow-up at on post the a debt then to look end deal net and you us gross in just side. year with And Is Okay. where your expect close?

Eva C. Boratto

on Justin, Let could. you me get to that, I back if

Justin Lake

much. very you Thank Okay.

Operator

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

Your line open. is

James Auh

Hi. It's on actually for Charles. James

clinic you about full-blown expect talk soft talked should and about in rollout? affects XX when a of how the your D.C. Teladoc, about capabilities we telehealth strategy on and the states rollout recently Can Teladoc Washington So, you

Larry J. Merlo

James, Yeah, Larry. it's

it we've of processes get them we're that to been mass, marketing are once There As we we broader state-by-state. you of out on. will state some And mentioned, turn more begin going rolling critical a through that.

well piloting. how the the in play the the we Medicare, play opportunity can at can we've complementary has more as what of especially that that practice. part expand as that strategy pleased those more look after-hours, the you with use of it As you role terms it's and going the clinics, our been scope to with were And come. can with expand the our there, We're cases reach it telemedicine as announcement and see play saw role the opportunities that role it that to of to

James Auh

Okay. Great.

And more? maybe you coming ahead on Is touch the you. is bit can the in million expected year $XXX expenses, the exceed it costs? in expectations. Can where of synergies little synergy revenue are more reduction upside original Also us opportunities now for medical to so which elaborate is two, by from? a Thank synergies you corporate

Larry J. Merlo

we're that point. teams I – about. really It's the into going synergies earlier, talked year. not And broadly we we'll And really work It's break this hard mentioned as to are we for out the the that those work revenue James. plans. continuing at And to around Yeah, get those details in as next longer-term more we'll about talk opportunities through our areas. areas

Melanie, take I questions. we'll So for two more we – think have time

Operator

you. Thank

the next Our of from question comes line Steven with Barclays. proceed. Valiquette Please

is line Your open.

Steven Valiquette

Thanks. Good morning, everyone.

was there retail large pharmacy in setting. you obviously away store-within-a-store a the services announced quarter, greater the from for deal during So expanded lab

footprint? focusing preferences you and are curious I'm your past just the about So that are opportunity, just relation marketplace just other type looking the on in your you or of investors maybe concepts to that retail general talking if that event what in of can Thanks. kind you're for just remind

Larry J. Merlo

be that same about to participate mentioned absolutely companies intend are opportunities new certainly be I aligned as it's time, we to build think whether front open programs we for opposed And there. achieved you partnerships. as Yeah, be the we create can of And these out we partnerships. in together. platform to value not others think that earlier, go Steve, from and there At to in can't I want clear, and integration as we'll offerings, the incentives, us the necessarily having about service and through an are certainly coming created, through

Steven Valiquette

Okay. All Thanks. right.

Operator

open. line Larsen proceed, Please Leerink with final our question the from your of And David Partners. comes line is

David Larsen

Express and a core high claims pretty the looks PBM increase reported Hi. rate a Scripts XXXX. bit Can about retention looks was good good for talk rate expectations retention growth like selling pretty you there the very season? It a pretty high, there,

preliminarily And that to expectations that Just leave and about XXXX up? you what think operating income? how does Thanks. growth is shaping

Jonathan C. Roberts

Yeah, David, this is Jon.

we our And retention I we've that happening in about from to little healthcare. less has this with mergers do XX%, yeah, higher So, PBM another so than very are saw movement a that a and one year, think talked of historically lot to business as was Eva had. the happy

XXXX, up. onboard a as early really us starting obviously. it's plan which just to comment very Anthem then, And mentioned, the the coming is for do it's we for far X/X/XXXX, activity, too health RFP As gear to on have contract that's as large we

Eva C. Boratto

And think terms in Anthem accounting about contract can given that of that terms think the business. you as a contract, we of net it about

David Larsen

Or there been are XXXX, Okay. nature any been be any competitive to there Has selling sort helpful. the profitability that in on and the of it like aggressive? or any comments a highly sort PBM Has going season? thoughts pricing Has XXXX there? roll of would contracts of in general been shift

Jonathan C. Roberts

than change. This do, we've The a no very go is a very this not their Jon. certain so would time-to-time, competitive own I seen it gets seen pricing what what you through strategies, know, the We years, it's industry competitive PBMs past. and I say on season. on get different more really in based we've and years step think several a environment, is some from typically over we year little see accounts consistent aggressive with last all as it's the as

David Larsen

just a obviously growth income quick for of then your operating about talk more expectations Eva. little of And And under Okay. one one bit retail's there? lot retail, pressure. Can sort you been a in streamlining effort

reduction streamlining at be that into high a and benefit? can around any Just around Any Eva? and thoughts gross initiatives would great thoughts cost level net benefit efforts turn when a Thanks. that

Eva C. Boratto

Yeah.

to other but the experience comes extremely programs, So of streamlining, data in volume numerous that we've Caremark, only overall the to reduce today. also as pertains customer cost the it we're We're reduce better we out through sharing to as not the PBMs looking pleased the better one overall specialty not the retail into PBMs, results make between but our call highlighted to the rolled in well. with channels

We to color continue to benefits to expect February. these in that in we'll ramp more give broader see provide than XXXX

Larry J. Merlo

– can had Dave, listen, of levels to you things terms better – always And have how a we we think while cost know I enhance do we service. of have in focus continuing

stops. And cost believe better about and in cheaper. just and okay, cutting, never doing but DNA about we not it's that our that's work – So it's things that's faster, that

about going Before the let's we to think out asked Justin round the back call so... question to I we're go – had debt, the

Eva C. Boratto

you'd asked question about would total Justin, It steps. sheet on the Aetna closure. plus existing our look the at $XX debt when the bringing be balance you on billion post around debt

Larry J. Merlo

and always, So thanks a Mike's with everyone, time morning. for of any many again you have we'll And see And are available. questions, that, there Thanksgiving. great if follow-up soon, your as this

Operator

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

CVS Health (CVS) 6 Nov 182018 Q3 Earnings call transcript