CVS - Earnings call transcript Q1 2019

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Operator

Good morning. My name is Melissa and I will be your conference operator today. At this time, I would like to welcome everyone to the CVS Health Q1 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator President, you Vice conference. begin Investor Krocheski, may Relations, your Joe

Joe Krocheski

quarter outlook morning for year. to conference first you and discuss results by. Health's Good thank the standing everyone of the for remainder Welcome to CVS XXXX the and call

a CVS being on Vice Health. Merlo, this by Xst, call I'm Wednesday, President of President is Krocheski, CFO. Larry and and Executive I'm joined President Joe Vice this Eva and Investor reminder, May As recorded XXXX. Relations Boratto CEO; for morning

remarks, to our Jon us and joining Pharmacy Following to ask President Aetna; a limit Roberts, CVS questions Q&A, COO; question-and-answer please more we'll follow-up. be Caremark; prepared host a Derica the no question-and-answer Karen Kevin of their In of for of also provide session. Hourican, the more President chance Lynch, section. during President yourself one to will quick order question than Rice, with people a with

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

filed to statement available reports in and encourage results cause we filed. related to could related later benefits, disclosures of synergies. future XX-K described that performance, consumer to financial are information regarding forward-looking will too cautionary be in what will Risk materially certain XX-Q. and that subject our in forward-looking integration events, we of and Reports review forward-looking on and be make the industry the future These We to you statements strongly on conditions, will these Aetna Our file XX-Q that our Report Form note, with during the SEC statements. may Form forward-looking the our the those reflect differ on specific particular, uncertainties Quarterly projections, views in market acquisition and and and the in Form financial Annual risks are expected the current be including the from once to uncertainties, website actual statements the call, our today and Please section Factors risks this statements our indicated that

review entitled You section should Statements earnings also this release. the in morning's Forward-Looking press

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

Merlo. to I'll the Larry over Now, turn Larry? call

Larry Merlo

what exceeding Thanks expectations. or our and by start with end per all ranges our contemplated Joe. the of exceeds Care we was guidance that for The are strong Health us. evidenced morning first driven was segment earnings businesses off strong initial by as Good which performance $X.XX pleased joining report share favorability. the Benefits at leading achieving high a the everyone year thanks to adjusted to of Today quarter to our I'm the

Services both longer while the result Now, and full X raising as to on in Retail to of realigned our $X.XX was adjusted This fronts. a and the to adjusted greater this Pharmacy, executed Aetna success Benefits on term smooth are EPS Health share And the our first reflects and focused in January Pharmacy Care for posted continued to full our We in growth, the $X.XX drive early our QX significant guidance XXXX it's combined Medicare membership we near many $X.XX singularly Advantage earlier momentum and to business, we with of of we year. year, shareholders. $X.XX. share a grow positive per operations some year quarter performance, value. and earnings value We entity acknowledging segments driving provided guidance both our a remain as implementations our

to the D call, I'll selling and addition highlighting In fourth called XXXX initiatives program. PBM initiatives, changes our achievements, our updates these on integration season, operational potential during operational policy important transformation Medicare provide on we Part the out impacting quarter that and progress

me mitigate the start actions near-term progress notable our made with let to we on So, impacting business. the headwinds

on the continued Retail/Long-Term for and care momentum prescription sales segment Care relationships. focus First, remains supported retail programs increased Adjusted strong, the quarter. network clinical our a X.X% our for by volume healthy

business Care targeted and space. new and In cost small track will have the margin in in and this guaranteed Long-Term a PBM, our and expect consultants model it efforts interest cost improvements to adopting clients our number living and to we work higher achieve net adoption for given clients on pricing is diligently of XXXX growth our Additionally, continue we to the driving management benefit year from continues assisted beyond. our garner

provide on We to shortly. enterprise across details reduce on through also new costs our efficiencies and our And productivity improvements effort operations. embarked Eva that across driving in a will initiative

business. the our Aetna integration to Moving of

And $XXX and XXXX. to where our and they have end bring important, our are. health ability pleased communities million while the services way the made. $XXX care tracking the demonstrating initial to of Currently, stores, our in to are million care goal HealthHUB the people meeting are synergy of We exceed we higher combination is CVS-Aetna are we we bringing approaches more our with we In for target on to the into very million new are about Houston delivery to market health $XXX synergies management. progress are to XXXX

care capabilities our the analytics their down are in people best driving to to next costs. achieve and We best using so offer action data and health doing health

Health by of of will care one's our have the our out benefits fill But to these strategy new connected address these the in The clinical resulting is routine. positive evolving experiences many initial this stores. consumer expand HealthHUB for we'll product impacts very how health our above while Houston the is to are next provide we'll in landscape. differentiating at and encouraged we enterprise we results model offerings And illustrate expectations. part market health be is Day. on innovations or first further and details CVS you and digital is formats The given various of our rollout share costs lower the will at Investor changing to across performing financial vision becoming And early service it with month. seamlessly regular and throughout health of care These Our Houston the elements interactions are our results store

from Medicare law our for for are newly metrics rule. CMS historically should to retention expect preparing with the has also to that the reflect XXXX to in are plan and bid. our rebate current retention unusual selling discuss not there and I of service stated And And plans been to that somewhat That proposed bids stands And selling rule CMS protection implemented levels be and XXXX impact need to demonstration want be lower the begin rebates risk single expected the applying And Moving levels acknowledging me Part role issues rate we sponsors provides by that a our the and finalized. performance in to factor before clarifying levels historical sale. return high in a the D XXXX Centene. of currently The project excluding of contributing the season PBM point than the D at addressed issued number season, remain mid-XX% of in guidance guidance that plans no periods. the how rebates the much Part finally, the should be future can rebate at will importantly, retention. of let

allow form to will such And Additionally, health. and will sector we remain both is engagement and the and our D evaluate discussion in participant. prudent the has permanent. takes, product. project Part sector The of program our incurred regardless the costs an our CMS. next phase to assets, in will impact to drive is by an stage care opportunities be renewed an that a to the significant more Allure to this play ability we shaping period important a real administration health plan on recent of said is This impacting reasonable administration adjustments the the potential broadly health together in members' continue to premiums allow be role to remain generated next make step learnings and Part and significant aided D private time before through new by the shape PDP end-to-end both and analysis the positioned we what And be of actual to health will demonstration a of essential will what the project offerings executing local stage. in the participate change landscape over the in demonstration importantly, we the capture to D And and This and made will private Part learn That to from program time. affordable more ever-evolving and project active quality to the that weeks. nationally attention care demonstration focus our create this best that important care positively an next consumer access confident

the So quarter turn the walk items update to to for year key our over outlook. the and me an let call full Eva through of

Eva Boratto

to this of February. morning and you changes quarter and with Larry Consistent can good prior results Thanks, morning, the posted the discussed website slide in quarters statements we back that our find our a first provides presentation everyone. financial details

and reported the Relations the found the comparable to First on on press measures a quarter be portion release results in and of can our basis website. Investor GAAP are reconciliations

the with we're thus want that reiterate intangibles for in we operating Larry said. non-GAAP, numbers. projections For our what results amortization excluding now income XXXX our mind and far. exceeded I out laid from are this We to pleased keep quarter we of

The $X.XX includes and guidance year high segments range. way. a managed was Health top SilverScript Care by Health performing the revenue revenue grew Our Care D increased Benefits for the Benefits guidance Adjusted X.X% operating XX.X% adjusted business. quarter. addition Benefits the Consolidated our quarter In was care XX%, PBM, segment business income. to above nearly operating increase adjusted the end Care Aetna claims billion which Health contributed adjusted largely with to $X.X of consolidated year-over-year income with operating driven primarily at revenue as driven EPS leading grew of above points margins contracted of of of This business the PBM the range net our contributed by and Part of QX compression this last. all expectations Anthem full operating our XXXX, decreased versus Choice. QX new end the operation above and billion adoption price Maintenance $XX.X the continued Medicare X.X% the X.X% basis adjusted included to versus XX investments. of XXXX up due or our in income due at continued

consistent the status medications commercial as costs to X.X% remained same-store this management adjusted Patient were the adjusted performed cost we number that validation held the to we X.X% released and segment X.X%, better And drug driven non-specialty our in the delivering a members in on expectations. Retail/Long-Term growth overall costs increase higher continued increases. strong tools. rising of of year specialty last QX XXXX Caremark growth improving affordable. just Additionally Medicare the successful that able of inflation Last as outstanding a Care in play an our drive expected. In preferred trends the costs despite in value prescription cost adherence. utilization costs list products for again report with of we The use drug to and in decreased with price This rebate also keeping the trend X.X% despite increased even of on by and unit year script improvements season. members while delivered was and growth stay networks. the Programs the of was system our health. through for we price down trend well to health than including PBM clients, with Part unit role are adherent for helping due total patients flu weaker average collaborations original formulary only out-of-pocket cost in X.X% guarantees provide row goal was drug PBM We their month. clients script cost care adoption our with Care Unit sixth overall plan D for the importantly, We a and our crucial

stands market in XX.X%. Our at share QX

headwind. in an X.X%, Easter holiday April XX later Additionally which front approximately store comps the basis of point to was shift increased the despite

As operating reflecting tax including year-over-year decline of pressure adjusted expected fewer first savings from reform; by we've last the care The and our factors investments expenses of XX.X%. previously discussed, higher performance quarter was income year-over-year year's Retail/Long-Term Care declined offsets; business. reimbursement using long-term driven with wrap continued

in we incurred costs quarter. Additionally higher legal the

strong Health profit year continuously with our Underlying operating to commercial expectations. before serve representing membership And and and asset metrics. As are million closures non-GAAP In medical with Medicaid contracts Consistent is these optimize our QX Care Florida. results the this members Care the we the of a Benefits looking XX ahead to over additional and by in the from charge Retail/Long-Term Kansas so, in locations. started the quarter we off retail right-of-use in pharmacy related we new charges. have initiation strong we our decision reported impairment driven operating discussed portfolio. ASC grew XXX,XXX of Advantage revenue non-GAAP doing the ways segment Medicare asset for made the and our primarily adjusted $XXX to close excluded finally underperforming We growth charge in definition lease, to store

health The cost quarter, products. the MBR development to the year core total a favorable start in XX% Our good reflects year. of medical all our prior across trends moderate was reserve and MBR

our are Benefits Aetna As Health segment. comparable close a the results the year-over-year given Care the the for timing not reminder, of of merger,

claims payable This metric the the QX which faster of claims is results. was historical for given days about days days submission lower difference Aetna operations X inclusion was which driven Our times. XX by than SilverScript's lowered by

repaid cash cash which long-term nearly the slightly were adjusted of a expense. we $XXX includes the end given on was balance more delivered and in weighted debt shares receipts. available shareholders through the commercial that since It's term X. close paper to million in of below quarter $XXX was paper into quarter-end, operations debt. first we with Going $X.X interest reduce of line customer billion. provision. we of $XXX debt balance the than outstanding long-term line, of tax long-term dividends. income million. at our to billion note less the strong that this to of quarter have of an and commercial important of income balance million loan In elevated We interest with million of operating repaid matured Taking $XXX timing than the quarter paid-off average And maintained $X from expectations average this also have all $XXX of and our lower April the That temporarily notes the expense quarter, account, generated fully We approximately since transaction using million

our quarter. revenue are billion our income raising to said, year This during operating to consolidated we $X.XX range first of Larry performance in brings EPS billion. the range to expect now as $XXX.X guidance, to full the We favorable year for and $XX $XX.X full between XXXX $X.XX. the $XXX.X adjusted billion to account range and billion, Turning XXXX guidance adjusted

of Care For $X.XX the segment be segments, $X.XX the in billion billion, Benefits $X.XX Care the $X.XX in the segment $X.XX operating XXXX to the full the billion, expect billion. adjusted the income $X.XX range Pharmacy to year range and billion we range in Retail/Long-Term Services of in billion of to Health to segment

first affecting Recall materially Our back not I outperformance website are from of the segments given this year morning. slides are the deal quarter. and the investments both each February, discussed in outlook the to factors Care what that incremental synergies the we summarized the which changed on Health updated expected The affect in the posted the disproportionately Benefits for our was have in segment.

target to Larry stem of the exceed corporate of efficiencies savings As of alignment. including track duplicative synergy some end tracking and formulary are medical the our are in cost year These will said, this higher from on to XXXX. and functions, operational million purchasing synergies elimination we $XXX and for the range

our programs These enhancements our on discussed on we call, As center and investments development achieve to of to growth. accelerate digital we also investments goals. new longer-term are making the February

to and We $XXX XXXX. spending between investment continue million expect million to in be incremental $XXX

In $XXX expect we costs addition, approximately of million, to integration our also continue are excluded from which guidance metrics. non-GAAP

are billion we billion which Our from to cash expect $X.X strong debt expected $XX.X available delivering repayment year. flows be operations, to flow year this this remain billion of billion $X.X $X.X to cash of between for and

rest loan of needs down XXXX commensurate in be expenditures insurance to the to in Care term In subsidiaries shareholder by approximately billion, our net $X.X down operations year-to-date addition growth capital our of billion for cash the maturity, reduced membership retained by capital The increased particularly and we space. of will Health billion paying approximately plan our dividends strong pay to year-end. with our from $X.X after segment, the government Benefits $X.X

expect debt we billion As billion for down to $X.X have I XXXX. to available stated, $X.X in pay

laser-focused are generated improve yield to initiatives upside And working cash our our we as of discussed generation previously, by cash we have our projections. which on current on to We would the a further number improving business. are

operating gains opportunity to both And have executing of had cost through we history a Aetna CVS initiatives. efficiencies, strong the enterprise. seeing reduction successful make and are our Turning across and to integration, productivity productivity the

have enterprise modernization across into various initiative. programs one We consolidated the enterprise

as generates initiative. help of more transformational and drive that dynamics in continue we for savings products this help provide customers, the and the and creation our offset targets competitive achieve expect our capacity will affordable initiative We our experiencing, to the gains strategic productivity are financial us investing we

the will growth drive longer-term help in XXXX. business beyond are We initiative combined that confident this

to XXXX, over in run billion of $X.X generate this to billion savings initiative our deal and this rate synergy targets. $X and above expect We is

progression consolidated will want operating quarters Year-over-year I of expectations be income on for as the the rest Finally, highest addition to adjusted Aetna. first the the of touch year. for three earnings growth we of wrap through

improving PBM in Health be greatest Benefits to see operating expected income in in within growth QX. to and throughout and year. expect segments lowest as adjusted Care the Retail/Long-Term is QX We income operating Care move our Adjusted we

adjusted Larry. be $X.XX For With QX, $X.XX. to back turn we range per to of share call earnings in that, I'll expect the the to

Larry Merlo

Thanks, Eva.

in the breadth evolving value demonstrated win with us progress all others for of ourselves the meaningfully The care unique provide landscape. and health in that superior create differentiate the generates to as position momentum from constituencies assets we company we pleased are to and We our and we market and us this quarter in shareholders capabilities serve. the a experience opportunities

plan targets to we flows well including and bring seeing to innovative services month, X. on the products our many you June to and Next forward targets. look on New we to cash And on our sharing market York those long-term debt details specific goals City plan achieve we as earnings, of as more in

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

Operator

[Operator JPMorgan. Lisa of first line Gill the from Thank question you. comes from Your Instructions]

open. is line Your

Lisa Gill

like you've for very plan the with you and on said congratulations that side. let know anything coming look to about on wasn't The I it there much start Thanks the quarter. if losses season. they're But primarily the what me seen at, I thus first specific knows least looks at far combined XXXX. selling health Street the that, Larry,

through health those playing secondly, So we that That decisions into about can my of around doing those relates be script a seeing retail loss into plan plans as question. health first will about with you far you coming going anything of – as a of see as combined think Or talk think you you CVS? as Aetna goes? then you CVS? Do those your business we that's it both do And business that own would that scripts lot to business just XXXX? utilization now are

Larry Merlo

which audience we've we're question. back. value that would Several interest an describe time I'll Lisa, interest in the well as morning, had how is of weeks were first broader good tremendous around have it I can there. discipline transformation Lisa, what's doing terms each groups, the advisory the we a Caremark. having our few interesting and with within Yeah, them. our We for And what as plans as create that of just is and for amount of part ongoing that Caremark Forum terms of health the Client in us take spent of

entering quite and sense So from actually, when whatsoever how concern. the and I this conflict opposite, transformation in they a entering those with did or get wanting any benefit notion channel is that not to the into can we're of selling at and where understand services. the products as season innovative And

Eva Boratto

the of with you couple improve Eva. is On your constructive worked say, last our as retail would have second your this of question strong part business network relationships, Lisa, and payers our I And has other offerings. know very years to over

develop we'll those to So continue and don't see relationships work there. and on back step anything meaningfully

Lisa Gill

Okay. Thank Great. you.

Operator

next Your Ross Evercore. Muken from of the from comes question line

open. Your line is

Ross Muken

morning, Good Congrats. guys.

sort I out what too So what like pretty don't progress HealthHUBs new recently in the just want to down but myself are figuring the of in models Houston a I mean, traffic of feedback the – the uptick. and and terms much guess one there it to work sense I'm the loop institutions. sort trying don't you've retail impressive made I the of get maybe I steal Analyst Day, saw and of from on side, the seems

going is the then you're you'll So to to things able the Aetna sort maybe rollout updates us when I can evolve less overall? member think as any refresh when of a sell-through of of with of that doing some some you able sort how come solutions Medicaid the on guess but base numerical, you're creative as and omnichannel of incorporate be you of of if – Just sort of to the that other better well sort do sort sense anything up to other with give front-end plan how side? sort on on of

Larry Merlo

more part ask question Great take terms amount it's Houston difficult comment things we missed. our a about then concept of that where in your right tweaking, have Kevin that talk – limited we're we're at you market got to in ready well prepared we I Ross, in still of the time, the of as because we're things quantitatively there that we're those it to but I'll it's as we're Houston our we to what is Ross, in to coming HealthHUB today what what XXXX. weeks. And seeing, to and then a of perhaps remarks, to a to I'll your Kevin are year would other strategy first detailed qualitatively more hearing complete describe some this question, beyond Larry. relates rollout And but point talk this things we as from at and point the as Yea, I'll will view ask have the as serving. heard we're

as So we opportunity. bottom you line heard in are remarks about our the excited

Kevin Hourican

more to together really our questions quite call Analyst it at items details have, plans said wellness place We're I but question. want We ecosystems arena, And other pulling health Larry thousands strong. And the we're the partnership the a answer about intrigued the health least, future. is of that We've in these that the pharmacists' with share kind and care I It's we X. with store a aggressively sorry, the expansion is all to which and plans. position addition by self-care to the speak a glue as The Aetna care June last the can that's reason creating Kevin. into the in compelling concierge, been format MinuteClinic services. HealthHUB greatest store working achieving that care on And And net expanded needs. added in interactions expanded We've we'll has consumers' new not with the benefits patients and to Day, on Larry. in of of can that appreciate the talk Yes, any called front objective. reaction including in as about that they our shop, health consumer detail consumer come needs and store. new help those – for

Larry Merlo

up Ross, just wrapping topic. the -- maybe this

is, the of that are interest things the we learning, talked that gate about hub-and-spoke our One out is of of concept. know I we've

Houston it represent you will. that metroplex, if to stores at about another of XX% needed the the stores, what about So look if market, you take we XX which does complete would in

using things build these So we're out we in are that broadly that the market. this there in how acknowledging concept, will we And again, that that learning the to hub-and-spoke aren't are stores learning apply hubs to as we're stores Kevin at But talk things mentioned, our metrics the again, target. are more the that we'll measuring, -- on pleased. that we that June about of or X. we're internally, objective all the ahead very They're meeting

Kevin Hourican

again. This comment. last just So is Kevin,

more pleased convenient delivery. expanded over You consumer to that to We we home adoption home day we're omnichannel. delivery announced in asked even about same recently and to X,XXX stores partnership see Shipt with

Ross Muken

the And, benefits it into this obviously, you've membership. on on seems coming done, quite I like maybe guess, well business, mean, I year

had momentum there. You

opportunities at thought like also, high sort is I maybe cost base you cost area sort think start really you've game-planned, more base? level some you of can the anecdotal, the or doing and integrated integrate again, of and to sort what about As very you're as on a anything as at Caremark. there you've types deeply asset in and within places other Analyst guess, of exist that sort Day, you'll needle, as tie share of, these to bigger that but of have detail where, well, that, in you do maybe we things think on can move of where you of wouldn't laser focus the we an maybe

Larry Merlo

that terms wide this covers amount a on customers to topics. gaining concierge. a we're having -- on two the tremendous it looking Ross, range And of are points Kevin is of position for, And our learnings what interactions them. question. mentioned Well, the exactly with based care in of

could segments HealthHUB got you thing about beneficiaries, there stores, I from a seeing mention Ross, a the second you've -- they And is, more broadly specialty, that have that may may third the different what market. and we more as concept that in we've in is of we is needs learning. we're is segment have that various than lot the around the think play that can what would but to things certainly we the I serve, that that, a of but one of some we thing, would on modified see Texas, that that think seen do seen see you recognizing based

So as we're that working on are those things some well.

Ross Muken

commentary. Thanks, Appreciate the Larry.

Larry Merlo

Thanks, Ross.

Operator

Gupte from from comes the SVB question next of Ana line Your Leerink.

line Your is open.

Ana Gupte

wanted like Aetna. brand some had positive, enterprise some color Yes. like Hey, offsetting positive. of standard on guidance, of you anything. at sounds maybe, you're I, it G&A thanks. Anthem Centene, you be you get should net though have that savings guarantee XXXX. on Omnicare pressures. the growth sounds saying if that out, potential I am The tapering there's The quarter. a they headwind what good to should which and is maybe of top building off Glad would And confidently, or synergy not $XXX the PBM story take even inflation kind is become the cancel better. million for and look looking a get above And in But your Good guidance morning. obviously, for some

this to PBM can you XXXX, in mean, I margin when be at offsetting handle go do do think into on But -- around you the balance, could that So pressure, EPS close $X you margin I retail that headwinds where XXXX? now look pressure. see

Larry Merlo

XXXX. the QX in in away, zero long-term of we the as a were Yes. Investor appreciate in and is the on today's questions there month achieve question. our on near to I and We beyond really -- as for our outlook and ticking relates results, Ana, is just targets month targets And prepared you off, lot that there discussion, appreciate are Larry of details we'll as you heard assure to I a on certainly Xth. you it including we are those of And the Day out how our can our next that light that remarks, share understand XXXX. point parts or XXXX June moving it's first

Ana Gupte

the line. and you've now on the quarter just follow-up maybe in margins come if on retail. Then ask Okay. in can I I mean,

the to the for exceeded And see original the network, your your the that industry the the a least CVS season up of does some that guidance into ability steer give margins, into in as secular retail pressures? whole you Aetna edge selling on PBM PBM? your then You've an revenue. how with And can offset do at for shaping on that you

Eva Boratto

expected. Hi, to I'll the Overall better our came retail businesses there. our questions Ana. of legacy or apart performance margins, your This and than both for at in is break Eva. PBM, try

that with of some the whether it of outlined, within long-term the expectation. the certainly we rebate guarantees, challenges some inflation care, was And performed headwinds we our

toward more longer-term, the we moving to improve those business. and performance services we we greater that our about margins said, opportunities the as store see and right in As providing higher as think opportunities, value, our

Ana Gupte

Great. Thanks in quarter. luck for the the question. Good

Eva Boratto

Ana. Thanks

Operator

question from of the next Ricky Stanley. Your Goldwasser Morgan line comes from

Your line is open.

Ricky Goldwasser

identified around are is year. for Should the congrats Hi. the we enterprise? you a morning. about And retail gross? are as think for more the broadly cadence billion. savings the Good $X.X XXXX? net think coming My cost good to Yeah. billion these to throughout question cost from $X about we should these start of savings achievable most cost they that And the how Or savings or segment? And

Jon Roberts

is So Ricky, Jon. this

-- we're together. have our come you four of I'll long-term then couple just companies transformative initiatives. talking of of the that initiatives value work comprised So program, yes, work initiatives it's this and give a business traditionally that productivity this unit that integration, on, and including pillars program modernization that's about there's underway for examples. programs we a the And effort are LTV enterprise-wide is already calling core that or we're as And

-- we experiences. and want at to is, deliver the time cost same cost simplicity share to and we substantial do consumer our that while improving First benefits, want

initiatives that and combined broader within the helping these of accelerate So goals. company's effort, assets, take while us savings capabilities advantage our enterprise unique

of rationalization examples some centers, of management digitalization shared So IT include services, our infrastructure. of these call and opportunities demand

this Analyst multi-year June at numbers. a savings effort. Day this is So talk are we'll more specifically our Xth. And These about on net

Operator

the question [Operator next Instructions] line Your from Ralph comes Citigroup. from of Giacobbe

line open. Your is

Joe Krocheski

Ralph.

Ralph Giacobbe

that. for the question. about Thanks Sorry Yes.

what provider provider to of I specifically relate time? over period what the favorable was year and just and of a called out You XQ those prior size recoveries Thanks. wondering the recoveries. and then

Eva Boratto

is Ralph. Eva. Hi, This

prior maybe included practices acquisition terms with Ralph? into can In terms guidance. I consistent reflected of last you period said all was In is Aetna about your there account our no in we of the prepared development it with from initial think the year. businesses prior another I our not taken in core across of of development development in results. the was and And year-on-year question with period question development settlement magnitude Overall, as experienced our remarks. also consistent HCA think accounting there legacy the around favorable in as with perspective, that some Was the a

Operator

question comes Mizuho the line of from next Hynes Securities. Ann from Your

Your open. line is

Ann Hynes

Hi. Good morning.

last reported of I reported Walgreens from and And operating think results. since had earnings I investors similar ask retail most get is the since me, question new the they a So is the lot on obviously you investors this profit. norm. if

think just couple you you stabilize operating can will happen to Thanks. headwinds business? the the can talk about ease profit in next years this what market over of trajectory of what So the or

Eva Boratto

Eva. It's term. in longer terms start Kevin of Ann. and I'll in, jump will Hi,

the provided tax very results, look headwinds incremental of to well expense our at this as guidance. we investments, we with you quarter. As that described care QX half the we was consistent our in long-term contraction as our what reform are tax Over attributable cited the the as

about think investments the As tax reform you subside. those

you be won't the about forward completed next year. our although Omnicare see go We are term. in as continue drive term, in near headwinds. run of back those we performance improve opportunities a opportunity to longer do part -- the expect services we the mitigate traditional expect an as in to are do we increase the tailwind And to year generics to as and and to to We as rate think stores get products improve we the and

Kevin Hourican

build is And This longer the that Kevin. you. I'll on -- Kevin just on Eva thank term.

We will think in talk about in about opportunities this more a on upcoming to the about improve June X. years you it But five-part think profitability if plan. the

increased drive drug. medication and script through comp adherence is our script programs in store First adherence clinical growth industry-leading

cost Sourcing. Second Oak Red of through goods is sold improvement

sharing Medicare sales savings. costs more business store health customers our our a things productivity beauty, improve aligns growth are through talked overall retail is briefly new into automation front and store. and on lower and through those And process improvement. we profit to contracting incentives lastly, the approach optimistic about through Fourth that we're Third reimbursement seeing drawing our for that last and in call, as

Eva Boratto

just wrap I'll the with Jon Obviously more up all that modernization our enterprise benefit And of thing. one spoke costs the initiative will aspects to business.

Operator

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

open. is line Your

Justin Lake

morning. Good Thanks.

of better First year-over-year? it just know and just them. come some terms rebate last to meaning you gave they'll color do you'll get us year year-over-year? less these renegotiate But does guarantees. back year-over-year? -- just get it actually think I around in next negative eventually with little less guarantees that confusion Or contracts guarantees there better unwind positive a was Wanted or on in rebate to quarter I whether is

Derica Rice

the the and that exposure years. is rebate this over Derica. stated peak XXXX then What dissipate in Justin, exposure Hi, ensuing begin was Justin. to will we that will

less get XXXX. expect that we exposure So in XXXX and to

out year, laid so our And we this guidance. it's within within well pretty our expectations that far

Operator

Your Steven Barclays. Valiquette of next from line from question comes the

open. is line Your

Steven Valiquette

Thanks. Eva. Good morning, Larry and

similar So of a the to other questions. maybe couple somewhat

high cetera around For CVS the high the Anthem have the around of curious level PBM XXXX? from or to profits given guarantees cost does qualitatively the Or strong business, large contribution already just volatility given contract CVS' Thanks. of Without now, be kind up there numbers guarantees, discussion guarantees likely I contract. all baked all the profit could visibility either only down just getting for minimum this customer internally any many et in contracts XXXX? around this rebate that on at is what just contract just conversely, from a in are was into still be discussion

Derica Rice

and is that great we commentary question. included That's Hi. When a Derica again. rebate We color This guarantees provided our appreciate well. exposure Anthem as regarding it. our

that about our in Anthem So as in well. and peaking when factored I years exposure ensuing then our XXXX subsiding talked it in contract

Larry Merlo

Anthem's call you The other keep in of on in week the I this of that X/X/XX. majority takes place to this heard second to include conversion on thing the business Medicare the last think mind converting half year vast Steve and that

Eva Boratto

on we be the piece about the as onboard overall Steve health margins drive And additional when in earlier in contract as add tend you and I'll profitability. plans, the large programs thinner think period our and initiatives execute to margins improvements that on we only to the

Operator

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

line Your is open.

Robert Jones

just would quarter? period on side I'm ones, I highlighted this think guys one if in on how for up quick just Thanks guess compared Thanks. billion is of prior the renewal expectations, side. the year, business the have the if I PBM the performance renewed? And for Of would development be was then Great. two much the just the Aetna curious you the you left to share questions. how not internal $XX for to still that

Larry Merlo

have I'll where consistent this with through point renewal Larry. in prior halfway up would it's season. renewal. first over We're billion It's Bob, with we we at $XX take have the the we years. said part. Bob, pretty for had just And time been

Eva Boratto

the performed all in we're we're memberships, of including so activity terms say we that But the And It's with business recall, Aetna's We the well, Aetna -- in would overall, new early a development. on very, year. onboard lot monitoring claim closely. underlying, pleased very I performance. period prior fronts, of

Operator

comes next Santangelo line question Your the Glen from from Securities. of Guggenheim

line open. Your is

Glen Santangelo

Care bit just for go Yeah. question. to gears Thanks a back the Retail/Long-Term little to wanted segment. and the taking Larry, shift

stronger were had a particularly season. segment expected, that bit than in we flu scripts X.X%, up which given a Your weaker-than-expected is little

early you you guessing to drove can that on it's I'm benefits anything of will that so, trend I'm that but maybe and bit us related little the it's that kind acquisition, too what a drove And could Thanks. give dive more trend. curious into the helpful. be what give of of and if that a sense for the sustainability kind us from

Kevin Hourican

to contributing This are is components. the third-party coming It's question. growth. three Think the relationships -- Kevin. which payer growth contracts appreciate our good One a network is about from script

is adherence organic growth through second The clinical programs. our

a market. would be their and new of And growth. multi-dose I drives we those earlier. therapy, our Money very And medication see health well keeping Patients Saving helps that better services. in on them to business. adherent growth it our delivery, to and we're We're compelling to path We've seeing newer new we've as services like doing on nice the spoke home program, piece sustainability services packaging the brought programs then that by patient their So third introduced to clinical some those and unique some it

Operator

Your next question …

Larry Merlo

episodic say, I in being we terms not and Glen, those to of nature. was just see in foundational going

Operator

of question Rhyee Your Cowen. line from Charles the from comes next

open. Your line is

Charles Rhyee

taking Yeah. Thanks question. for

a Just here. staying for second the Retail segment with

that a One forward as you couple through heard competitors related of on moderate ago move in generic you into results. that and that. And of that weeks already down moderating generic I is has haven't that? talked I XX% of moderating guess sort baked is we your to that about talk deflation are cited you a And when generic their at -- Can here about deflation call look you're in talk guidance for of sort the the environment generic terms really really of you thinking like to of about generics. from as your kind of thought My trend Because partly -- the that referring the not been kind about been you of -- from what had factor generics prevalence being be you the how it it of and necessarily break-open looks some continuing seeing my of effect had deflation? or guys half of to would -- deflation. assumption with the March. their more

If color great. Thanks. be just you provide that, would on some that could

Eva Boratto

-- Eva. is this Yeah. Charles, This

our pertains generics It in to lighter is see break-open XXXX. as what improving terms what back in fewer included we've guidance. of opportunities all it is seeing we're with a is this than as in year. we prior generics, year to and February, In outlined And years we're seeing the we what it it relative overall seen

Jon Roberts

suppliers in us -- more thing market. of process that is allows about the the the a flexibility. rapidly only And then you've talk add improvements gives would That more lot Charles, to the to I heard FDA get

as XXXX better continues think And but move Oak significant for we said, forward. so, that us and as for us to Red deliver less we be even we expect we seeing opportunity are -- value value to Eva in

Operator

line comes next A.J. of the Your from Credit Suisse. from question Rice

Your line is open.

A.J. Rice

is could few the Is Is years? in on Hi, everybody. on breakeven as you accelerated. growth profitably years to few Or that last you was wonder of on for just part Medicare the I seeing think you're rule it's there gains? come enrollments the what this to last typically share any growth parse at Advantage more if And bring the Obviously, I question. how it Medicare that Or assuming? the the bit one story of reason guys the know market Aetna MA. of not? sort level. the with of bright them is Advantage. And Thanks out guys, for year on year. spots expanding be board you're or was geographies thumb a a you little might able come that members In first those which

Karen Lynch

the for our of are same-store to a product. driving channels. as yes, we Star from existing to that generated those marketplace. has And the this Karen. would very and also would to would And growth really well. has margins. strengthening line area grow would been which it's growth services has us typically product we've combination I of give management coming It's our performance product would activities, that allowed for I helping been that excellence for say it. zero-premium business, also characterize we generated continuing to is our and good our a would And with year Advantage say with are number our also what pause amount say resonating I us. One, to plan us. our us our on expected the there's first A.J. any tell in we all has continued flexibility I tracking that I been of you our on managing margin the what think places. But grow strongly in distribution expectations. say line in just this we're our expect footprint is, Relative Hi, expansion year have look are growth would factors metrics in Medicare Medicare clinical our fair I then We of margins I the deterioration. but nothing which also growth I any we in in see that lower and And Advantage

Operator

of line Your Percher from next the Nephron. from comes Eric question

Your line open. is

Eric Percher

Raskin there the guidance demo Josh Thank potential you on you, and harbor Eric consequences. constructive lot proposal from a more the Percher unintended after of safe announcement. Nephron. the Larry, CMS and sound is Obviously,

pharmacy of impact looked there the appear comments at buyer to a we and your you disallowing a as As which purchase toward comment discounts end dispensing would was pharmacy. around

take that you to I to in wanted view? ask do material occurs? So is And to your it what offset action try that if

Larry Merlo

your make number all-in because rebates, Well, Eric have to let me rebates. as we as sure it talked relates question following always an about have I'm we provided

-- regard. good down take sure form serve. rebates brought that happen if we of following so And has competition through continue about that don't members what the there discussion discounting. I'm in discounts drives look results we that a a at for sector of And how private And we that from doesn't that sector that that for discounts And type lot lot as clients has is the to can rebates see away. we of some the around as must net pharmaceuticals in there emphasize of get your rebates that but you misalignments. the we we form, price price private form things have into see the down some make the and any ability or to is been talked that we can other If question of of a what issues go

Operator

UBS. the Your of next from comes line question Kevin from Caliendo

Your line open. is

Kevin Caliendo

guidance when built quick numbers? prior That into original second on the I strategy we've PBM know or a lot there. to Is do strategically? the companies offset the there there on development any is dipping one. with seen but and retention one One morning. question of side by guidance, offset -- I those similar first Good PBM wasn't losses low some the the side headwinds historically share the into down some the then year on was XXXX they've taking prior times just a can in in mid-market And the the of been Hi. able incremental contemplated year updated it something to you maybe development. the for

Eva Boratto

today Kevin I'll forward So No practices. take period development our we the realized and with numbers Aetna the prior initial in guide is period the in was first consistent legacy reflected The question, QX. thing presented go projections development. regarding that prior only

Larry Merlo

And Kevin, it's Larry.

terms still continue on provide selling Kevin, the stands question while of there's second XXXX lot for as a the of In update selling we today And – provided the season obviously remaining updates. an it to runway we'll season.

have to way long we before the season. we still a So go complete

Operator

Wells Fargo of line from Costa the Peter from comes question next Securities. Your

Your open. is line

Peter Costa

Question Health ratio maintained morning. business Good of your on the Care and benefits medical guidance XX%. Benefits on

Aetna do synergies? a this the Or about? -- period favorable that this the seasonal development, full pattern range which would be the loss you year had end you'd point typically was thinking sort the all you really at you're on say you at through lower deal think will not medical that Can you And of at lower ratio think you're Given it's rising that that the have the the range prior you'd of time. in range of of because then end the point?

Eva Boratto

in Karen early Eva. additional so cited of provide year, we'll with monitor It's as we provided utilization. a was year stick we'll their we'll as which the range. continue throughout It's growth Peter. Hi, membership to range that and updates. the lot progress There we Obviously the

throughout In terms the first it's carries go given of SilverScript pattern year and Health on as which the SilverScript segment the quarter moved progression you the over where corridor Aetna we Benefits as throughout pattern reduces highest different we the quarterly in than risk to the a year, stated Care sharing. traditional the the

of MBR. driver key maybe a of bit QX a see higher-than-expected a little why you that's So

Larry Merlo

two I think questions. we have for more time

Operator

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

open. line Your is

Michael Cherny

with and health made to becoming Hi, thanks a I to they an and conversations you taking guess they new Larry, you're there the user want own to recent you for about the for what engagement the with doing help initial PBM integrated are a earlier for go meeting value regarding Aetna, is or that looking level. of you're your and the plans that can that And what you HealthHUB understanding what them drive you, as qualitatively were think now provide comment with the I store the engagement back push them? potential question. CVS having push realization as going base entity forward?

Larry Merlo

Yes Mike.

I stay. to consumerism of First update a growing the of as as this that to here all we if provide in that -- would to did say describe we the part as And health include we meeting, realization work is that an care there's today HealthHUBs.

focused unique and more seeing care combination though, point, selling of more that have we're as bricks-and-mortar to -- the in important to a you made thousands care is consumer interest products. and in I point can for in customer-facing that it we has of products earlier and fact at minute evolution terms a gaining even way. of assets is be the through some what HealthHUBs an to of store the just what it's hand points discussions, some in of a some we're It's reflects surround-sound I lot health Kevin think the the that about retail our attention part that do palm And that not this just the at think of see way strategy, that these services of of that our So your And if that's that we a and mean. some on potentially health have dynamic of touched. the beginning

Operator

of comes of Inguva the Hima Bank America. question last Your from line from

Your open. line is

Hima Inguva

great. of the and recent Eva three be and Thank clarification good then leverage delevering credit little on on you times bit on of rating Thank conversations see cadence you. Congrats you could quarter. if the also that agencies any pace a with you to target the getting on a wanted timing your when just color the would you. Maybe share expect.

Eva Boratto

for Thanks question, Hima. the Yes.

consistently, point, provide As our this initiatives said, Analyst -- we at Day. cash to and pay improving well as working improve working down opportunities Jon believe, for continue to debt top that to on a look review to That we We'll with that loan going our times down We're spoke is cost three the initiatives the to in $XXX to paid rating. year. the said enable full as leverage us we provide paying in deleveraging QX -- our our as to low expect to and business addition end will continue down priority of full I by our And term million at get in we pleased term the map this our about, to loan of pay that longer-term we're we're on our we capital, driving not portfolio road there. early, growth to working generate leverage.

Larry Merlo

there So here, make trying multiple just were questions. all there We're track answered to everything, of appreciate we've up questions. the wrapping to sure questions. recognizing lot pieces were to We a

were the that that clarify, those Eva do I the provided want execute modernization, And to the expenses want to numbers incurred had One enterprise that that. I to after things gross about or the clear were the of Ricky think asked cost question numbers be net. we any reduction,

seeing were listen And and those available are X. obviously of to net look hopefully all you improvement numbers. team And for June follow-up. forward we on Joe So his

Operator

call. Ladies concludes this conference and today's gentlemen,

disconnect. now may You

CVS Health (CVS) 1 May 192019 Q1 Earnings call transcript