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CVS showcases strategies for accelerating long-term growth

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Company rolling out CVS CostVantage at Investor Day.

WOONSOCKET, R.I.— At its 2023 Investor Day on Tuesday, CVS Health is sharing how its strategy and combination of assets drives reliable, diversified, and accelerating earnings growth, while also delivering superior care and value to millions of Americans.

Karen Lynch

In addition, the company will introduce a new pharmacy reimbursement model, announce a new brand for its Health Services segment, and showcase continued growth opportunities for its businesses.

“We are successfully executing on our strategy to advance the future of health care while unlocking new value for consumers,” said CVS Health president and CEO Karen Lynch. “The combination of our businesses, and the key growth areas we have invested in, drive our ability to lower the total cost of care, improve health outcomes, and deliver on our commitments to our customers, consumers, and shareholders.”

Introducing CVS CostVantage

CVS Pharmacy will also announce CVS CostVantage, a new approach that evolves the traditional pharmacy reimbursement model and brings greater transparency and simplicity to the system. CVS CostVantage will define the drug cost and related reimbursement with contracted pharmacy benefit managers (PBMs) and payors, using a transparent formula built on the cost of the drug, a set markup, and a fee that reflects the care and value of pharmacy services. These changes will also help ensure that CVS Pharmacy locations will continue to be a critical touchpoint for consumers to access affordable health care in their communities.

“We are leading with an approach that will shift how our retail pharmacy is compensated by implementing a more transparent and sustainable model that fairly aligns pharmacy reimbursement to the quality services we provide,” said Prem Shah, PharmD, executive vice president, Chief Pharmacy Officer and President, Pharmacy and Consumer Wellness, CVS Health. “It provides our PBM and payor clients a foundational step towards more pricing clarity for consumers.”

CVS Pharmacy said it plans to launch CVS CostVantage with PBMs for their commercial payors in 2025, working together to ensure a smooth transition.

Following on from the launch of its Choice Formulary program earlier this year, CVS Caremark today introduces TrueCost, a model innovation that offers client pricing reflecting the true net cost of prescription drugs, with visibility into administrative fees. Simplified pricing will help consumers be confident that their pharmacy benefit is providing the best possible price and will allow members to have stable access to our national pharmacy network. Through this approach, clients will have the flexibility to choose a pharmacy benefit model that works best for the unique needs of their members and plan, and CVS Caremark TrueCost provides another valuable option for them. CVS Caremark plans to launch CVS Caremark TrueCost in 2025.

Launching CVS Healthspire to define Health Services segment

To help demonstrate the connection and convenience CVS Health uniquely delivers, CVS Healthspire will be the new branded name for the company’s Health Services segment, including Caremark, Cordavis , Oak Street Health, Signify Health, and MinuteClinic. The groups within CVS Healthspire will continue to focus on integration across the company’s assets to deliver connected patient care, pharmacy benefits, and innovative provider support solutions in communities across the country, making expert care simple, more accessible, and more affordable.

The CVS Healthspire brand will begin to roll out publicly this month and advance throughout 2024. Consumers will initially see “Part of CVS Healthspire” appear on select CVS Health care delivery offerings across digital and physical assets as the company continues to create an integrated ecosystem for patients.

“Delivering care in a more integrated way – especially for complex patients with chronic health conditions – improves health outcomes and the patient experience,” said Mike Pykosz, CEO of Oak Street Health and interim president of Health Care Delivery. “We are already seeing the benefits of our value-based model to lower the total cost of care for customers, clients, and patients, and we believe we will build on these results as we more fully integrate with our core businesses.”

Accelerating momentum through combined strength and innovation of leading businesses

While CVS Health’s business segments continue to be successful and profitable on their own, there is a sizable opportunity to continue strengthening these connections and create incremental value for the overall company.

A notable example was the recent improvement of Aetna’s Medicare Advantage Star Ratings. In just a year, by leveraging the power of the company’s cross-enterprise assets and executional excellence, Aetna was able to achieve 87% of their members in four star plans or better for the 2025 plan year, a recovery from 21% in the previous year.

“This achievement was due to the work across our Aetna, CVS Pharmacy, and CVS Caremark colleagues. Even more important than our ratings, these teams worked together to help members improve medication adherence and overcome barriers such as costs and transportation,” said Lynch. “Our strong performance in this area shows how we can quickly unite our businesses to achieve important common goals.”

Reiterating 2023 financial guidance, announcing 2024 full-year projections

CVS Health interim CFO Tom Cowhey will detail the company’s 2024 financial outlook, capital deployment strategy, and long-term outlook and growth targets. The company’s unique combination of assets provides CVS Health with clear opportunities for long-term outperformance, including through Medicare Advantage margin recovery, incorporating Star Ratings, starting in 2025; CVS CostVantage, the company’s new retail pharmacy pricing model; increased patient enrollment in Oak Street Health; expanded product offerings through Signify Health; and enhanced growth in core businesses from new offerings in health care delivery.

“By broadening our portfolio of integrated products and services, we expect to create a path to sustainable, profitable growth,” Cowhey said. “Our powerful cash generation capabilities will support our strategic goals, prudent capital deployment, and attractive return profile – while also providing opportunities for meaningful long-term outperformance.”

2023 Guidance

Today, the company is reiterating its 2023 guidance as shared on its November 1, 2023 earnings call:

  •  Total revenues: $351.5 to $357.3 billion
  • Operating income: $13.6 to $14.0 billion
  • Adjusted operating income: $17.2 to $17.6 billion
  • GAAP diluted earnings per share (“EPS”): $6.37 to $6.61
  • Adjusted EPS: $8.50 to $8.70
  • Cash flow from operations: Upper-end of $12.5 to $13.5 billion

2024 Guidance

The company is initiating its 2024 full-year projections:

  • Total revenues: At least $366.0 billion
  • Operating income: At least $15.0 billion
  • Adjusted operating income: At least $17.2 billion
  • GAAP diluted EPS: At least $7.26
  • Adjusted EPS: At least $8.50
  • Cash flow from operations: At least $12.5 billion

Announcement of increased quarterly dividend

CVS Health has announced that its board of directors has approved a quarterly dividend of sixty-six and a half cents ($0.665 cents) per share, an approximate 10% increase from sixty and a half cents ($0.605 cents) per share. The dividend is payable on February 1, 2024, to holders of record on January 22, 2023.


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