CVS - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the CVS Health Q4 2019 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Valerie Haertel, Senior Vice President of Investor Relations for CVS Health. Thank you. Please go ahead, madam.

Valerie Haertel

morning good and you, everyone. Thank CVS Welcome XXXX quarter full-year fourth call. to the earnings and Health

As call reminder, a this is being recorded.

Senior joined Larry I’m CVS President and Eva Haertel, Vice Investor Vice of Valerie Relations Boratto, Health. Executive I’m President this Merlo, by CFO. morning and CEO, President for

more session order Rice, Officer, limit with our President Karen the people Following question-and-answer of remarks, to President Jon ask include Aetna, during with more will we quick will prepared Derica a of yourself than Lynch, In Caremark. Roberts, provide a and to follow-up. question chance host that Chief no the question to Operating one a please Q&A,

slide to call in with website. press presentation practice, Consistent a and on this our our release, addition our posted we have

and will available XX-K be be website that week next filed time. will at Form our on Our

call, and financial during our financial make Please synergies and industry and current this our as of services, consumer our and from related products including benefits Forward-Looking reflect performance, to views note we Acquisition. our future well as Aetna market Statements events that the expected projections will that conditions, future certain

These and could uncertainties, Cautionary of actual what our XX-Q. risks particular, that in Statement those and information in uncertainties to in file Statements the these in Report XX-K to subject Forward-Looking disclosures on Annual quarterly our section we SEC cause with on strongly from forward-looking Form in may differ and to Risk Concerning regarding Factors are described that materially reports them. indicated Form review the are the the results be We statements you risks encourage the reports

this press entitled the Concerning Cautionary review Forward-Looking release. Statements also morning’s in Statement should section earnings You

measures accordance reconciliation and morning’s use Relations measures will non-GAAP the SEC document talking financial reconciliation with the financial press Investor we regulations, In condition. about release our comparable the the earnings call, portion on of in when can these you this company’s to a GAAP of performance and find this measures website. posted During non-GAAP

is be year. broadcast our call as will being on for where one today’s it website And always, archived

to Now, I will turn call the Larry. over

Larry Merlo

everyone, Thanks, joining thanks and good Valerie. And morning us. for

a was significant year full and acquiring first in after year made we progress our have Aetna. transformational for Health XXXX CVS

executing We has our initial value been against our have delivering substantial which been plan expectations. above

And and this value execution. integration by our our and provide a as synergies. the improved operational from XXXX, for across provide is details our Eva discuss will driven XXXX our our as businesses I growth on along will financial highlights contributions with outlook few performance well

of of adjusted full-year the XXXX, operations of $X.XX we For across momentum up per earnings our revenues enterprise. nearly positive Aetna’s full reflecting XX% a year delivered share billion, and with $XXX total

flows net return cash repay billion the to to enabling shareholders debt, accelerate invest future from in of form of us to operations billion long-term strong of generated to $XX.X We of our dividends, enterprise. $X.X billion, cash $X.X continue growth and

$X.XX, of June year’s earnings outlined approximately baseline to Moving we excludes growth Day the X% with growth gains to of progress $X.XX is Investor realized at development. in expect last our and of we range net what capital to our which over adjusted per $X.XX, year. This ahead prior X% XXXX, share of continued representing XXXX

combined accelerate company positive greater confidence growth our beyond. performance and in our us stakeholders strong our key to even from gives a Now, as along in with XXXX feedback ability

across successful U.S. Health year over our with a a significant delivered of and health CVS laid for in And clear path health and consumer-centric integration, the growth. an part way the businesses. set foundation the bold have strong to have care for that integrated a most of a is transforming of delivering expanded We company, is suite we be services

simpler to achieve better to their particularly healthcare healthcare making it chronic on make navigate decisions, country, helping health managing and their more outcome, across help focused when health informed disease. people remain consumers We best local comes making and the

to We functions And all have they And our technology transformational create year. grow where few four deliver differentiate four transformation we businesses, and and on have priorities infrastructure, are that I the And of in recent we have Day. services, will June at enterprise Investor guide driving these products capabilities. innovation. are and and momentum and advanced priorities outlined past a as touch a briefly our areas highlights we demonstrate consumer-centric modernize our

our by grown In business over Health XXXX to industry our services membership have nearly outstanding XX% times generating last group growth Advantage our three businesses. Medicare membership $XX.X in growth government In Care Benefits, particular, in of by and the up average products. individual strong driven our we Medicare over over year, both in million, X% grew

announced at for a program pocket in Last commercial book, new of or zero low members out MinuteClinics, our enrolled year recently three we for zero diabetes options Caremark, our we with implemented January co-pay XXXX. At members care. for million

average enrolled expect on in per We out-of-pocket to an estimated save $XXX expenses. year members

number In programs developed we management, of the a of and chronic service pilot area offerings. innovative have disease

As cancer integrated to assets that the an capabilities. together and science program example, includes most pulls patients transform oncology and genomic effective uses treatments. our It latest help care medicine is technology a new the that the program precision receive

to simple, are the pharmacies, at which We our our forefront point healthcare are and quality innovation seamless of effort to of care affordable. more retail make also bringing the at accessible,

visible aspect important our and to strategy integrated locally. HealthHUBs our millions way comprehensive component an of transform the we most of deliver care to offerings fundamentally the are our Americans of And

costly expect where HealthHUBs patients expand primary treat more avoid care. unnecessary of physician a we our we about or to Now can as can care and help XX% what treat, our practitioners MinuteClinics

at HealthHUBs, panels rolling retail other also we will We out our began to pharmacist expand which locations.

holistic at and medication And other to connect panels combining by pharmacists fingertips, data regimens, provide And integrated their appropriate medication and close medical health in MinuteClinic resources. care gaps pharmacy adherence, at these our data. view patients can or patient, a the having of their XXX-degree improve optimize plan

to line we and higher continue MinuteClinic services. control sales continue and group increased with to and increased see hubs visits, health-related expectations our are outperform our with volume their utilization store of front script Now in

Now digital including satisfaction uptake a people of are in strategy care And seeing digitally And our their seeing engaged online of messaging. strategy positive higher our consumers. our loyalty hand. our and of consumer-centric of as consumers are the palm us is meeting key engage from via apps, where part we are and text we through they rates increasingly with

our listed have foundation established in growth. and to integration offerings accelerate Aetna more to solid points are past more So few a they that the over our the profitable pace those a the innovation, year bring are people, the and with drive just validation accomplishments of and slide presentation, of several more our unique activities

continue priorities for What innovate our following. we our to As we key this will and close to the stay four markets clients. to serve and means we is execute, needs of the respond the

the programs landscape, are services high In a manage Within innovation. looking creates of need acuity particular, solutions expansion they for plan our health our for condition government chronic clients, the to us consumers. and to and complex,

local and offerings ability in touch to and our creatively efficiently personal with with market. service deliver place high-touch data coming and advanced And with convenient products we the care new analytics, to and points have local and our

continues specialty of includes specialty estimate This reach pharmacy the about of total gene importance and to benefit, next that XX% year, it grow. could and that and years. XX% management services, under therapy over costs the Second, is spend it the medicine we and medical benefit of paid solutions healthcare several

experience and our new and are and continuously we to clients lowering imperative and area is to better innovating programs further patient bringing a solutions costs. in this And innovation delivering

importance Third our the is platform open of approach.

to we in-house. committed to and extending many are the health offerings plan We technology services healthcare our that developed clients,

XXX health across system plan XXX over relationships We and alliances the health have enterprise. about

is they integrated these solve continue relationships that we to of healthcare grow vital will model it also the business, as the us and our these not but are only And benefit landscape. our issues managing. transformation greater we the transform clients lead help And

our white continuing disruption. not space offerings discussed and enhance our as for our are MinuteClinics, finally earlier, And to to local any we leave working through HealthHUBs

the traffic, savings. four medical our growing locations For form only margin of walls higher retail value within and in the products cost increased services, us, the of is and

experienced substantial placing changes our in enhance plan, to execution transformation where by our past deep market us relationships core leaders innovations strategies. made today’s our further and the immediate enable and These businesses areas the to executing growth bring that our leadership our positions will initiatives company experience accelerate of have growth. their with announcement will in So both we our to progress more rapidly

talented opportunities with reflects along personal model announcement business bench deep This creates also our our for and growth. the

and leadership And take me to contributions. their want moment Alan, thank to on So roles. for Alec a Jonathan Derica his let and I also new congratulate

And will together Derica and ensure Alan to transition. work smooth

and how our leadership of of that the stakeholders in place confident have we us work driving control their to forefront I’m we the are right So with in and change a health. at us, take sea team how about consumers think key

over let Eva. And with that, turn me it to

Eva Boratto

everyone. and good morning Larry, Thanks,

adjusted our our of capping across EPS the and enterprise the delivered $X.XX all consolidated successful the stated, performance fourth Larry off year-over-year. strong of we a across in As XX.X% revenues quarter, continued grew quarter, adjusted fourth our year In businesses.

a The Pharmacy lower-than-anticipated of segment, Care Health revenue driven Services higher fourth volume addition followed in Benefits primarily the was by increase tax rate. in also Retail/Long-Term the benefited Care both quarter the The segments. from by Aetna in and

Looking our fourth by Within X.X% at Pharmacy expectations. our exceeding quarter segment. Services, increased total results year-over-year, revenues

including by inflation. was IngenioRx increased and specialty driven the growth volume, brand of Our on-boarding

increased the and benefit shift Pharmacy in improved synergies. compression. into adjusted partially versus Services X.X% line operating last our Pharmacy income Services to mail was economics, by volume, primarily the This year, offset and purchasing including of claims with specialty price expectations, operations Aetna’s from due continued increased segment, order

our with strong driven our script up scripts delivered growth patient with We comp Care was up primarily care Performance X.X% X.X%, adjusted our the Retail/Long-Term continued to of segment. X.X% adoption expectations in total with by line year-over-year. of programs. Moving revenues

Front the by income strength positive XX sales continued increases increased and Our of store in share cough store including scripts in beauty, operating health and fourth cold Same-store in quarter. a fourth points. primarily to be XX.X%, was front sales retail up sales. driven X.X%, quarter basis and driver

dispensing expected, rate. reimbursement pressure. Throughout and adjusted higher the Adjusted declined Care to volume as continued due increased generic from Retail/Long-Term X.X% year, income benefited income operating operating primarily Retail/Long-Term Care for

were Care delivered that government from to growth Benefits. results our strong our to continued Turning Total The expectations. line with products. revenues in Health benefit membership in segment

fourth the for expectations. one related was for starts. Total plan the health investments year, expenses Benefits and the with our higher in MBR to one, quarter in for line were XX.X% Care quarter readiness XX.X% our Health

strong operations generated significant in generation billion we strategy. XXXX, touch above cash briefly our expectations. from will I and coming on cash In $XX.X Next, our allocation capital disciplined of materially

improvements in partially We timing of long-term by driven receivables, in impact $X.X XXXX and primarily our payables working capital, which Cash will repay cash net approximately including billion was of flow XXXX. the certain guidance. debt to used

we And close billion long-term the repaid debt. of the Aetna transaction, have of approximately net since $X

the returned As Larry also to mentioned, cash $X.X shareholders year. we through dividends billion during

Transitioning share per to of to earnings is $X.XX $X.XX, the guidance. our reflecting Full-year baseline in an to range of from adjusted expected X% to $X.XX. our X% XXXX be XXXX of increase

activity priorities, of low-single-digit more expectation successful and growth with growth. versus our low-to-mid outlook integration favorable our Given to improving is our growth strategic our previous single-digit projections execution for

XXXX prior full-year XXXX gains about financial to results. capital and development, our the net which projections $X.XX reminder, a realized exclude contributed As year’s

billion, of full-year consolidated of revenues the X% XXXX $XX.X X.XX%, to expect up adjusted $XX.X range be We the range $XXX.X income billion X.XX% with to billion, $XXX.X total consolidated to in in X.X%. billion up operating to to

cost we expectation Integration million million. about XXXX, of $XXX synergies to integration continue of of the million have in from in to discussed the synergies from expect streamlining previous up as our of and the contracting in medical efficiencies in integration our will operations, XXXX $XXX functions, We past. range $XXX come savings,

Projected our integration $XXX million from results. approximately of non-GAAP are costs excluded

billion deliver from to expect $XX.X in We $XX.X billion and flow operations XXXX. between of cash

certain this previously includes to of that impact have timing payables receivables outperformance. contributed XXXX stated, I our and the As

cash retention to billion to $X.X our capital billion remaining and After expenditures continue projected of pay insurance of to plan available growth in our the billion, of capital gross we to $X.X to the use down support payment billion dividend, $X.X shareholder debt. to operations $X.X

We in of on goal times to reach leverage three remain our low XXXX. track

in expect billion to between enhance term. billion cash value to long continue We to shareholder the $XX annually generate in to $XX

of $X.XX to our As previously stated, we our capital dividend will our demonstrating maintain commitment return share, shareholders. per to

exercises. the including Keep option are repurchasing increase mind because in outstanding that issuance, share continues shares we not with compensation-related weighted shares, to average

from dilution incremental earnings XXXX $X.XX approximately those reflects Our share adjusted per of shares. guidance

Moving to our segments.

representing operating to For is growth to of business billion, in and adjusted the be X.XX%. to Pharmacy $X.X purchasing billion of income full-year XXXX, Services Day billion revenues $XXX.X billion Investor to economics. of to our with $X.X we range to This retention relative expect improved $XXX.X X.XX% the improvement due stronger outlook projected

$X.X the Since additional our larger our as wins. business in Centene business contract improved QX retention billion, momentum. of new earnings reflecting is Included our by portion of call, net client the a net business well as new

pleased are that our We through contract XXXX. report extended have to with we Centene

these Year-over-year income to net compression industry in factors selling and economics is losses adjusted growth modernization. season. improvement in is continued attributable the positive wide operating performance, Offsetting continued specialty and purchasing price enterprise the

resulting inflation, from to lower we We discussed brand calls. on have continue cycle guarantee previous our which rebate through challenges,

completed to that XX% are including renewal and extension the we season, of have selling to through renewals retention, of XXXX through FEP strong XXXX. contract XXXX, with the contract the we to ahead of approximately the WellCare looking pleased date, Additionally, report the

be that expect. Our our importance expertise clients managing costs. we continues of focused remain will continue paramount and relationships model and the PBM scale, to drug value in vital to be delivering on customer The

let Care. Now, Retail/Long-Term to me turn

of between Retail/Long-Term representing full-year Care adjusted billion growth X.XX%. with total $XX.X income and X.XX% revenues $X.X of $XX.X expect to billion, to billion billion be projected to We operating XXXX $X.X

that continue its deliver including adjusted continued clinical medication due patient of patient programs, retention. Retail to X.X% our care both execution to adherence of is to pharmacy to script successful and expected growth strong X.X%, improved care

be continued reimbursement by partially to our offset pressure. pharmacy growth expect We

store operations line and our personalization expected focus health Front and growth a on beauty engagement. customer improved drive to bottom increased with business, are and

enterprise Finally, benefit our we expect modernization. operating from Retail/Long-Term Care enhancements by to productivity delivered

projected $X.X we $XX.X Care total XXXX in billion range X.XX% to expect of with Health billion $X.X the Growth XXXX billion operating to to segment, results. income adjusted billion, of to the is growth be representing of Within revenues Benefits reported X.XX%. in off $XX.X

government our We line expect growth. strength continued top in products driving

expect between to from Medicaid the growth, end fueled and XX.X medical by million XXXX members, We Advantage with Centene. IlliniCare of XX.X and Medicare including million acquisition

for a Care consider few are There to Benefits. Health items

synergies to the segment. First, Care will benefit Benefits Health integration continue disproportionately

HIF points. approximately to Compared there XXXX. in MBR is benefit XXXX, full-year minus XXX XX%, the be the Our or to expected of is plus basis approximate point basis an from XX inclusion

effect the year-over-year. $X.XX an drag HIF adjusted From the approximately is perspective, a EPS of of

points, be Our income core of commercial leap medical minus or acquisition offsetting of with day. approximately Adjusted divestiture cost that partially WellCare, trend the is even X%, the effective will IlliniCare. the plus expected basis XX and is to operating be impacted by

Starting will share in quarterly XXXX, per we no guidance. provide earnings longer

continue historical drivers quarterly color directional results of may the provide our provide expected to performance and to to progression insights impact will We transparency. that earnings, relative on

highly as are we achieving enterprise As on our transform and the we business, goals. a our focused whole

value. our And integrated We based business performance. long-term are compensation also shareholder are metrics driving on our goal managing our with annual the of internal

color lowest the expect quarter both earnings is QX we the earnings some the expected XXXX. due and in Services the to Care me let Pharmacy quarterly to segments. about year in seasonality introduction, provide be that the of for With Retail/Long-Term progression

Benefits’ Similar the to XXXX, support to Health progression that earnings segment, quarter lowest will including earnings fourth quarter Care readiness. due spending for the January to be

throughout that of benefit the ramp will expect ratable be while course more to year, integration over also the from synergies the modernization We enterprise year.

trajectory since our In the very Acquisition long-term enterprise. for have pleased the as as have confidence progress close our summary, XXXX, Aetna well strong with and we of we are outlook the made of the in

transformation updates year, to Over HealthHUB progress additional we our our of provide on the our you and efforts the roll-out. status related the will course of with

questions. the open let’s line for With that,

Operator

[Operator Bank. comes Instructions]The of from Hill first Deutsche George question

is Your open. line

George Hill

taking Hey, And good the for question. morning, guys. thanks

in I markedly guide I improved. I Eva. very the XXXX numbers we guess want think if numbers look segment, to the revenue the very are profitability seems start XXXX, but PBM Larry are close, the and claims close, versus at

than profitability? you what driving could guess the similar is number on So that segment, and dynamic similar kind of of a is I claims revenue better a where expected in kind talk going number of about

Eva Boratto

is segment gave from Overall, with to improvement Clearly, will and quite our Yes, this Derica we are the it Larry for I the George, is we laid that a Day. pleased then at or want in. PBM Investor today. what out jump if Eva. expectations start significant we

And And will I as B, two you purchasing results there economics. look at are that from outlined. we continued the call business, A, that we key provided the previously. drivers season in selling what improvement

worked have about at hard those the results. yielding through as factors, challenges, rebate look And is all generics. working improving improvements of goods, We our underlying in we it our our the cost in rebates, of network thinking

I want Additionally, the effort, to lose is for modernization don’t the it our expectations contributing to also PBM.

Derica Rice

is -- this an and recall Anthem in terms that stated George, us. I investment year XXXX very for was we have XXXX also for implementation, become the in profitable say also I Derica. proposition that us would that IngenioRx of on

as said, versus to have outlook And lessened in reverse obviously been our exposure XXXX. that hard in have for peak seen rebate has the our and we working we Eva exposure we that XXXX that realized

are reducing be fact track, mitigating we in terms that of thought and we time. ahead that over would exposure we So of in and where on

Eva Boratto

the that that the network the our And account ramp as the in about a basis. in to the year-over-year, you of through on net the will as is claims flow not contract see claims, perspective. Anthem think benefit does on-boarding recall, you And of on revenue

George Hill

were ask, the just to you not saw capitalize on that up you you think I I range guess, maybe modernization. a any just just guess the you And kind drove would of that opportunities any little like It that comments Thank bit. is a narrowing before top-end? on, helpful. And guys Okay, seems are that on versus feel narrowed you. able helpful. did or is, you then the I like be would enterprise what follow-up there I there? quick brought that

Eva Boratto

we George. No, financial really an overall are program. confident perspective, in From that

As range And in XXXX. to the initiatives. color as a Jon of we some we out the closer, tighten just provide bit wanted look we got some can on

Jonathan Roberts

with focused an way substantial time so And very the and delivering our modernization well deliver at consumer to we where efforts experience. George, while under recall, are. smarter are are benefits, happy we as we on cost unmatched working you Yes. same with

we So across some lower of of key robotics developing that at focus are levels excellence areas applications data, that of number enterprise, deliver centers service our excellence of are so use the modernization, rationalizing technology will cost. higher centers for us. Examples

We are also but significantly and moving deploy cost, to lower will that only reduce cloud hybrid capabilities. environment the time to a not build new

working our processing natural call and by intelligence, We productivity out, leveraging with artificial are robotics calls improvements, also along technologies. optimizing taking by language other on centers

initiatives We those, digitization then on optimizing across will are that manual the rationalizing company. our business there focus and processes vendors are the and of

we And implement that to serve our allow finally, leveraging schedule analytics an customers. us will advancing and better data to management and are enhanced us to example, that allows capabilities. tools our And workforce integrated as

So those are some examples.

our own I time is service think substantial to deliver we we actually the multi-year that both savings improving same this see at the customers will and envisioned, and our effort employees. while originally opportunity a

Operator

of from Your Wolfe Research. Justin Lake question next comes

line open. Your is

Justin Lake

Wanted on on and first guarantees. the to Derica’s follow-up rebate question comments

or another were rebate bottom still have XXXX know level of expecting see meaningful improvement? we happen recapture you into in on in kind should improvement quickly, guarantees that there, the of seen kind we a terms faster of change Just XXXX, of I

Eva Boratto

impact head a greatest the of a we is on XXXX, immaterial into see you And guarantee, the think, It less do was in I we Yes, headwind. XXXX. still as in headwind issue XXXX. Justin, essentially as the said, rebate albeit

Larry Merlo

and mind clients, heard with created some that. throughout we offset portion And Justin, in with There win-win. those were and headwind a us more headwinds of XXXX, clients of you able us adopting a that keep helped which as value was associated to mitigate formulary, the potential for talk complete them a working

Justin Lake

And Thanks. the numbers. just my core then intercompany around question was

down is the makes divestiture Your year-over-year got also sense, into went profitability, down looks intercompany I few PDP like it given thought intercompany the revenue, which actual getting lives. correctly, Aetna number, billion might if think of worse, better. have I’m a instead dollars which instead of it But backing on I those

it which year-over-year, strange. So actually on looks bigger is the like bit drag a EBIT I a negative intercompany thought little

intercompany, wondering So whatever could -- what flush I EBIT the intercompany Thanks. drag the increased if at out from corporate perspective. was happened on you an especially

Eva Boratto

Yes.

with down, as Choice. I think, Maintenance reflects look that you. had being and clients what business you affect have new margin underlying Justin, record as right, those the clearly, of selling there, that Maintenance that look the And that Choice for intercompany, margin the elimination at business, the that has that at of season adopted which can you net we that

So that an of there. is flows there aspect through that compression price

Operator

question next of Robert Sachs. Jones from Goldman Your comes

is line Your open.

Robert Jones

Great. the the Yes, for questions. guess guidance. on retail I thanks over maybe

We the walk are off guidance But line saw year closer, that specific just low-single-digit could coming growth. in EBIT in you have major declines we previous the for now, largely wondering high-single-digit now communications which if clearly growth a blocks XXXX. you with maybe in building I’m through a seems your quarter

just helps low-single the clarity last to get at helpful. us be So the you the of did time will major communication down little up really a again high-single bit now probably blocks that the than from more if us you give could having the wondering

Eva Boratto

Yes. This take I is Eva. that. will

is to result from of I So It as I a growth, there generics, things highlight. at improvement growth, low-single-digit and look impact the will you Right. modernization. script continued think from returning that are solid four meaningful

have longer said, headwind were the half we we segment that the segments reform of XXXX. through wrapping I modernization investment that the as benefit the remind think at you in will retail tax other our we have XXXX. versus As I the we look of disproportionately initiative first no

Jonathan Roberts

health Roberts. and we the also is is, reposition I other working focus on would Jon this to thing say The beauty. And only front store are a with

focus margin through in little execution front, line growing a around And to the in pivoting are front, the growing on the We our we bit then HealthHUBs. are personalization. top growing the

Robert Jones

there guess the to helpful. I I a stores. comps? drag think usually forward. No, guys transitioning Is contemplation or could of that obviously Is And what you you segment are is would to be transitions, something a as setback before XXXX? know any closer the these overall, around backwards of a follow-up that be now then contemplated there the that through these on you growth about in bit as steps the when is one-step go two retail in lot

Larry Merlo

it you It Bob, Yes, will expect heard time provide and frame. us talk critical have will Larry. guidance spring, more bigger And last in a you that is. late as we mass is the year, hubs as operational, mid-year get we the can quantitative of be we

Operator

from comes Ricky question Stanley. of next Goldwasser Your Morgan

open. is line Your

Ricky Goldwasser

morning. good Hi, Yes.

So, another one follow-up, and then question.

the impact you terms we HIF from would repeal? of the what mid-year commercial changed highlighted in HIF impact, about When renewals On on headwind HIF think $X.XX. is due the what the to be is follow-up, the side

Karen Lynch

in pricing overall would into we would our margin move commercial be it Ricky, we forward be And we that Obviously, with reduction renewals Karen. in. that - should expectations. will overall Hey factor as the our our balance business with factored it is the

Eva Boratto

Ricky, And Eva. this is.

about change So relative the really discussed had repeal June. to we is back the what as in we spoke that for in back XXXX only June, HIF the

Larry Merlo

comprehends on the page. Ricky, sure And we that just The same are asking. make all the $X.XX question you are to

Ricky Goldwasser

get just the was much before of versus original and guide? question. the was Understood. My purpose it That your question we a is of now how Or sense $X.XX your $X.XX? an head was, there incremental

Eva Boratto

Yes.

of think, out, Ricky, modest - I but haven’t a change couple to that it was repeal pennies. a the us adding we broken

Ricky Goldwasser

future. expanding key that investors some whether become then understood. to you primary HealthHUBs. adding point from know Obviously, see stickiness care primary strategy strategy. Okay, kind the for you population are And to the in that of needs primary are with I we greater to at And care relation the kind your the an one whether others something time. are considering has HealthHUB for primary get that the like that over part like we important this you getting And question, to the vertical my in the of care Teladoc address are questions create obviously have view versus going our of Teladoc, is on of is Larry, you on acute but industry. function wanted assumes of the could a

Larry Merlo

the of as Ricky, opportunities And treated network. have today, is sit there, Ricky, office. comments our talked great okay, well have what in about practitioners can provider our a utilization lot we Aetna technology a Teladoc, as is capabilities across the it you we that And Yes. that heard a of about question. our treat we as PCP nurse in prepared today XX%

have time, PCP. they our in to The one want the about physician. in value the element complement with a lost being And I the all sure we same use words members, about talk the about talk get need role the that that because to talk consumers, talk doesn’t also they relationship Aetna do - to emphasize that to of a the navigator. it they I make this want of like we our they primary care for And as at

help how back looking can are you one role. of the maze can use - me the ability that people of terms healthcare? this can to navigate local, We Our that you gets be help access, that how it complex me my to call playing in imperatives help and the fact HealthHUBs it fact concierge. are me you And how called through benefits, the

So want to this overall I in lost equation. get that don’t

Operator

Gill Lisa comes Morgan. of from JP Your question next

open. line is Your

Lisa Gill

want I morning. much. kind and with very XXXX to the compare Good season of it thanks selling Great, start just to XXXX.

book about the really remarks the Caremark low of co-pay about plan selling component? zero etc., just plan So how then what is for some that designs drove options compare the in in better we your as formularies, Larry, talked that we do XXXX? to XXXX And profitability you heard members. are you and the aligning that you I about within and for versus think selling that Are business? One, talk of prepared you your commercial Aetna XXXX

Larry Merlo

the with selling ask Yes. Derica just broadly, into there. we Lisa, dig the I season will to then and will and start questions start

Derica Rice

Good morning, Lisa.

our it, $XX you business of into about came very selling the was retention when book that rate. was season, high a about we If think have we And XX% that renewal today, billion. completed around of for up with

off the So a have that heard as of from as WellCare the retention you renew opening start. are able were And comments, strong well book we to included through XXXX we business also of signed well. we FEP, which very as to as Eva’s

what outlook only the but for our is think well. for economics is helping XXXX, drive outlook this, this of XXXX not about When you as to our

anticipate So we net that we overcome having guidance the loss XXXX. in XXXX, in new business for our don’t overcoming are obviously to

that So formulary mitigate when XXXX. our peak as to Larry to de XXXX well. to time I previously, the stated and minimis rebate we be in it exposure. about by in our to efforts And really mitigate expected again, then was related have very bodes talked that XXXX it expect to that the to obviously And get we management, began

that improve think improved essentially here but that outcomes access selling terms downstream. launched a to co-pay, that And think adherence, well it our as we the And RxZERO health removed we as see medical that program just co-pay. will not claims out-of-pocket but of translate all our We are expect will for our only then when we zero-dollar about into diabetes we the to clients we recently where zero-dollar that the in recall patients, burden.

Larry Merlo

for point, care members. Derica’s Karen. zero Aetna point, the diabetes over category then that that as Caremark I both and to members as well Yes, and flip will to co-pay at Because to Lisa, it is

terms pull in back pharmacy know, and apply and have I And or takes those around apply of, the the passed down today do the sponsor that table. you excitement the And the monthly off at discounts that get that tug plan those counter do premium. as to in I is, they rebates the buying discounts this

that no reducing is And value over that I of make costs, decision. improved formulary, it But by maybe they that to Karen, to the will OK, the clients have benefits of flip adopting the longer and And you. program. medical adherence beauty

Karen Lynch

medical. pharmacy in we XXXX. seen have interest more members We XXXX color And just the integrated of all you Lisa, integrated January give sold of to did actually pharmacy in enrollment, some than XXXX on strong we the

integration obviously, increase in also had business sold Pharmacy. interest significant with XX% and we was So the about a in new value

results strong story. the integrated relative really So to

Lisa Gill

diabetes making contracted do And RxZERO kind like Is it be we to and those forward? programs about to I going it pharma are more think way about Just as fund the of in scripts incremental the of some to that profitability people how we the in that way because Is the you up do program? are how you things think the these think going helping that that? about profitability program? adherent with for

Derica Rice

Pharma Derica. funding is not is this Lisa, Hi this.

In about way fact, pretty if you think the is have constructed much self-funding. we

value formulary, and to diabetes cost offsets get they patients. terms are part improved outcomes through offset compliance client with of improved able So and the obviously the meds they then structure adopting one, the have second on an create our the the medical their of in adherence downstream the with by

for client win-win member the sponsor. the for or a both, themselves, medical plan for as both control costs is claim of terms the the again as the out-of-pocket So it in downstream well cost burden

Operator

question next Kevin from comes Caliendo of Your UBS.

Your line open. is

Kevin Caliendo

want Hi, the of some I thanks economics. stronger my taking purchasing for around comments call. go to the through

on in to is better of PBM. incrementally? six also purchasing want changing your and is as like generics understand both Just over mentioned the purchasing what dynamic, You I’m is there. that is specialty making last changing months better there the well. what guessing sort is What the

Eva Boratto

our well venture as Right. structure look I right, for Oak we improve every will And we teams, opportunities. day. start. and our cost Red to Overall, our internal each work with as

there There our opportunities, right. all are is negotiations, is of part contributor. You rebate a are our network generics, negotiations specialty

Jonathan Roberts

is Kevin. Yes, this Jon, and

next launches out the look is there over you generics years, couple of biosimilars. significant be going to of as So, and

As matter these a XXXX there and of between [indiscernible] of is to fact, going be launches. XXXX,

generics, see single generics but with we says, source as also Red we how Oak. an And complex only opportunities launches, And and in biosimilars. purchase existing very opportunity are with happy not Eva existing we we new see

Derica Rice

the And which just part don’t utilization. better compliance improves comments Larry on the terms earlier as formulary in well, clients of made of our around also also the underestimate the having yield

Kevin Caliendo

that the In now I renewal. $X.X was confused Can with just WellCare it past, the And about it so million billion I really renewal. you just the that be from contract? around there understand one about Centene of a terms the Or, or that sort follow-up. of more $XXX detail me helpful. Am thinking help in right? what would just quick was little headwind, headwind is happened Okay. some

Larry Merlo

Centene separate Yes, events. Kevin, in-keep just two that these transaction in with were closing, mind

WellCare the So was extended. contract

three-year originally that dynamic extended larger portion through contract what a Centene starting was is been XXXX period a for of period X/X/XX. renewed contract As Centene business X/X/XX, was another that again and you went the And effective recall, than the around three-year has planned. will

and some for the that the of we cases And rolled of exchange to contract we programs. RxAdvance, and of the three-year So over expect to that operate business the contractual off retaining business balance business both some in business largely Medicaid periods. are that value the

Operator

comes of from Cherny America. of Bank question next Your Michael

open. is line Your

Michael Cherny

the this enterprise, I feel back, you do and perspective season. to hub, that Good selling the not about with relative you you the tipping accelerate you what resonating to you the working plan integrated make sure morning, all have And just questions fully guess putting point you? or they are of about selling are of question. to had the to value have the or season, you pieces can doing they When the when planned and are sponsors you overall thanks maybe so maximize try asked be taking that in start pharmacy are much but Lisa guess circle to for the within else I asking wanted lines, the already I together need offering, in dramatic how do from think some to a where the is market? along those that medical consultants about

Derica Rice

here really well benefit this of say it I kick we actually we to Michael, talk of the beginning when the as good employer advisory I that PBM, we relates you Aetna meeting, feedback anything plan it the to our as January. as and from one you recently both the have clients, the But held PBM. terms consultants, will off and of Karen, health And is want client in add business. if at to hold book when have Derica, will our the for just had we base

They extremely resonating health. them medical on very behalf our of member HealthHub ability Michael. our excited personal claims, from of their take action and own the pharmacy opportunities well, and next and incite to That about use are their best with is to the integrate that points intervention the four

seen some there health this model. plans would around is to were question And what have we that, how new integrated on take

now health management that on have of some with our have development. of plans programs, We had a and care that we in come pilot have us number chosen into

with our out bringing that new developing Aetna open marketplace. playing And we insights platform are those again and with of colleagues. we to consistent some our the So, them inventions in are is well along that actually very concept, side

of So I move and I is we selling continue season. we to do Karen? as the to start the would selling well. successful our remainder that season, contributing expect that into as think think that XXXX XXXX to as the And about

Karen Lynch

Yes, our Michael, very similar responses customers. from

about opportunities of about increasingly journey. the members data and and met connecting with the throughout the HealthHUB, really their analytics, the excited our We our brokers. They are connectivity and excited personal have recently health from the customers very

into really management So we our are how is programs, are connecting about communities. they where that care excited the their employees

quite resonating been is well. it So

increase enrollment sales why the we this have had I in season. pharmacy the we think open that with is that -- medical seen this integrated

to we be our develop our or Action. we new behavior But continue we capabilities, look Best will advancing Advice Aetna to change as programs Aetna’s Next will XXXX, like

of drive place a the continue those of to and at MinuteClinics sites HealthHUBs for will care sites using We as local primary care.

designs coverage. we plan our and the resonating low-cost transform and looking new our but our the benefit will have no all We And with clinical additional continuing our MinuteClinic, been will also for first-dollar kidney to designs and co-pay round then RxZERO of like continue programs like out at be to which drive care customers program brokers. new oncology program,

Derica Rice

in is an So our is where is client and. the It to power getting not this I for both it lies. the solve member. either-or, is Michael, really traction the that And and is think ability what really

Operator

next Your Lance of Bernstein. from question comes Wilkes

Your line is open.

Lance Wilkes

different how overall strategic I to the looking wanted if of a the are of and organization company looking Yes, place, kind been see take for changes with at some taken roles for. you sorts are supporting different have of your you taking have and let a and got, that vision the you thanks context the forward and appointments address back that you how and in new management are maybe you talents going there little to the bit question. step put that,

Larry Merlo

we results planning across think it on over everybody call is I proud on a are Yes, of seen evolve Look, the that. we Lance, have robust very pretty the Larry. always with aware, had organization. structures that business. the needs we is have organization program of management time depending and this development the And And

remarks, these to services very around results quick products have changes as of as we to you and today, opportunity into coming excitement And the talented deep and these So can. my a hands more and and them the market, priorities we bench. prepared more in possibly heard have really we people get and as in reflect that the the

are very what in of and So at where about are excited we we pleased today front us. with is

Lance Wilkes

smaller just there medical Great. the positively cost impacted I quarter or appreciate maybe talk a a quarter the And with negatively. it. fourth standpoint, if to a projections, point, you experience anything bit on else about your little is relative commercial cost, among that from if fourth could for maybe businesses and your medical

Eva Boratto

is this Yes. Eva. Lance,

line fourth say it guidance guidance. the of at our plus As or lower basis in minus with our would at our we medical X%, quarter cost end of I it range look points. was trend, was XX

changes call as played to expected and out look out. is As at we year largely XXXX, no the you really there

Karen Lynch

thing know. Lance, December, in is we flu earlier would saw I only an season you the we as likely add heard --

relative reserves. past of We But have we years to have we coming in It in the that seen seen bit in flu covered little the and nothing the January, higher a aren’t happen like the it but in B, it feel incidences influenza have out ordinary. December, are in our the we season, seeing adequately severity outpatient. down we is

Operator

question Giacobbe Your Citi. comes next of from Ralph

is open. line Your

Ralph Giacobbe

end the Can trends commercial on split idea morning. better a between you Health enrollment and as market little commercial give just ASO segment? think good in and Benefits about Thanks, by the market, the XXXX? bit specifically we us the And

Eva Boratto

you to know commercial we to as choice business, our business. Relative the to commercial continue offer

the end of a to have We particularly the lower small in from transition segment. seen risk ASO

combat what We have segment the smaller seen self-insured have of we the end product been to changes. a offering those at to relative

are national us some will Relative came to January. year, in down accounts of accounts year. business, we the we into mean latter coming our of we flat the we see national in are to aware well But of ASC business that I kind as and to the half

increase group, number the that in that to business. And then pressured we we continue So latter of year. to in be in small we expect in contracting half that business the are and

Ralph Giacobbe

Okay.

about have of we year-over-year down season And lot So in the sort is say pharmacy business XXXX? the fair it a on to selling I commercial then side. guess of sort talked specifically,

move selling sort Just HealthHUB through see sort of is Or see if the with the pieces? integrated it the of more will, sort and roll-out match going going sort resonating of is Thanks. medical of season the you with Aetna of year in CVS to to be that selective XXXX, that should we think as we more given is expensive the start about we pitch, growth the commercial integration into XXXX? to the something and as this

Eva Boratto

Yes.

pieces, Given growth better to in the of expect the commercial integration we XXXX. see should

Larry Merlo

our be Yes. mind in and the And plan it XXX by is will between XXX Ralph, that for keep hubs year-end.

concentration is we first you surprise phases. markets, Aetna that we do we for match have as to of prioritize not masses. need critical these going build to It So members those to worked

we have Chris, for two So, more got time questions.

Operator

sir. you, Thank

question next of Charles Your from comes Rhyee Cowen.

open. is line Your

Charles Rhyee

see you kind going in look the health HealthHUB there remodeling has question. of taking out all remodeling just services that are think control for being it, these all adding how that back, sales. how is aspects a in of I maybe the group? that go a you and we refresh are seen the so and forward, beyond formats, ask as you more expect with far kind HealthHUBs? because you as Larry, same-store at And And gone stores, something of we a thanks historically know end the of with you retailers that Do kind And in stores? we along also way maybe your across products the that the hey, have front about you when sort of And talking applied are HealthHUBs is can the when to come phase I that of at be of think HealthHUBs intuitive a as that think beyond there, you just looking Yes, been extended the there. shelving new into against have is when HealthHUBs? could back trying just you something X,XXX the uplift

Jonathan Roberts

this Jon. Charles, Yes, is

in and health the are And to the sales hub at same we services. remember, adding and general the converting items. and XX% the are merchandise probably So shrinking time, HealthHUBs, lot we it of of wellness floor taking a the

across store the we products are the margin those actually in sales front our in categories when we because actually stores, at are carrying taking health and margin. And of are deploying are XXXX seeing our HealthHUBs look learning positive growth and wellness and HealthHub we what are we components and higher fleet. And we

remodeled stores opportunity our last of formats have that the an is that upon and majority just have several we also to stores, depending all expand and recall about there in. fleet. we geographies are years, different And yes, volumes So over to the

feeling that stores are and to good are continue to about we shape in ability the our really grow. these So

Charles Rhyee

of so. Thanks. $XXX bit, the probably XXXX, out that, it maybe the can $XXX you there XXXX you timing looks roughly more little end guidance, exceed bumped are XXXX we that better that an And million, look call the When Thanks. a looking guidance, that at again million. of quickly related is $XXX when about opportunity is partly our fairly it we synergy taking up a is? then or a it like outperformed up at like nicely range you from, how follow-up in kind in million and of can think Anything in where target or to pacing $XXX million realize given synergies, you

Larry Merlo

it extremely those the ahead that of able the on work of quality of accomplish was done were fact Charles, really schedule. to it we reflects and the Yes, terms well of in integration activities many

So it team. is the really job a by great

Operator

Your comes of Steven final Barclays. Valiquette question from

open. is line Your

Steve Valiquette

Great, Good thanks. morning, everyone.

but particular. commercial little just bit, medical a question topic in around for this XXXX on cost a touched trend You the

better companies We lower in talk managed to XXXX due trends care have pharmacy integration. about seen some other

maybe the the trend might X% mentioned on or deck, are your I’m in that curious, XXXX, inpatient XX offsetting X% cost slide you to for further integration? be in with Page importantly, over So areas outpatient elevated expected some in there commercial is Thanks. improve either you overall the bias any savings? as get Aetna for along merger time pharmacy trend CVS, there more Maybe any

Eva Boratto

to our drugs, Relative economy, like that out in of our the trend the is is know but what use provider include we in consolidation, factor included trend emergence there some their of ordinary. trend competitors nothing specialty of of - obviously we but variety things don’t a technology, our expectations, in of continued

projecting points. think we our X% for plus basis will We we minus in, or savings well. we occur XX And as typically trend in confident accounting we quite factored are where how are what at factored in

Steve Valiquette

a over come time? merger? the commercial shouldn’t of trend From trend the down Should be merger overall though, this beneficiary cost overall

Eva Boratto

Yes.

you saw longer-term So time will we cost more progresses. that have Investor back as But Day, toward about meaningful savings at medical Steve, we through right, the Right. projections. and driving say integration are haven’t trend we provided as to

Larry Merlo

that, healthcare agree that with importance everybody I affordable. with making just because us here, our more quickly you So time their strategy hope thank of in and for really results local let me reflect the simple, just today’s summarizing

XXX,XXX to the progress our commitment that plan, while we meet are serve, executing to and the we are our pleased made for us to the that continuing the accelerate nearly with and goes needs all And lot our purpose. And of work hard for growth. ability of of credit markets here in diverse have confident colleagues a in really all that we our to their

talk sure to soon. I’m will we that, with many So you of

Operator

and this concludes conference Thank participating. for Ladies gentlemen, call. today’s you

You may now disconnect.

CVS Health (CVS) 12 Feb 202019 Q4 Earnings call transcript