NEW YORK: CVS Health Corp reported a higher-than-expected fourth-quarter profit on Wednesday as its stores sold more medicines and the pharmacy benefit management (PBM) business benefited from higher US prescription drug prices.
The company, which acquired health insurer Aetna for US$69 billion in 2018, is not planning further major deals until it has completed the Aetna integration and reduced the debt load it took on, Chief Executive Larry Merlo told Reuters in an interview.
Aetna revenue nearly tripled in the quarter from a year ago to US$17.15 billion.
CVS, which gets discounts and rebates from drugmakers in exchange for listing their products on its formularies of preferred drugs, in turn guarantees rebates to its PBM customers.
Profits have diminished in the past few quarters as the rate of drug price hikes has slowed under intensifying pressure from politicians of both major US parties.
The company played down the role of rebate guarantees on a conference call with analysts, and said it expects the issue to be immaterial to earnings as it heads into 2021.
“We’ve obviously been working hard to reverse our rebate exposure, and we’ve seen that exposure has lessened in our outlook for 2020,” said Derica Rice, head of CVS’ PBM unit, who plans to leave the company after February.
The company forecast total adjusted 2020 profit of US$7.04 to US$7.17 per share. The analysts’ average estimate is US$7.15 per share, according to Refinitiv data.
Barclays noted that CVS has a track record of providing conservative initial forecasts compared to its ultimate actual results.
CVS plans to offer less expensive expanded health services such as blood pressure screening and diabetes monitoring in 1,500 stores by 2021.
Executives said they could eventually expand the format dubbed HealthHubs to all of its stores.
CVS retail store sales rose 2.5% to US$22.58 billion, also helped by higher branded drug prices, while sales in the PBM business rose 6.2% to US$37.07 billion.
PBMs negotiate drug discounts for health insurers and employers, and take a cut of the rebates provided by drugmakers.
They have been criticised by politicians and patient advocates for their role in keeping US healthcare costs high.
Excluding items, CVS earned US$1.73 in the quarter, beating Wall Street estimates by 5 cents, according to IBES data from Refinitiv.
Total revenue for the quarter rose 23% to US$66.89 billion.
CVS shares were down just over 1% at US$73.00.