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Prescriptions, pharmacy benefit management propel CVS Health in Q1


Woonsocket, R.I. - CVS Health showed vitality in the first quarter of fiscal 2015. The retailer beat expectations in areas such as earnings per share (EPS) and pharmacy benefit management (PBM) operating profit.

“We delivered better-than-expected results this quarter, primarily driven by stronger-than-expected prescription volumes as well as favorable purchasing and rebate economics in the PBM. Adjusted EPS increased 12.2%, to $1.14, five cents above the high end of our guidance range, with operating profit in the retail business in line with our expectations and operating profit in the PBM exceeding our expectations. We also generated approximately $1.6 billion in free cash flow, and we continued to return significant value to our shareholders through our disciplined capital allocation practices,” stated president and CEO Larry Merlo.

Net revenues for the quarter ended March 31 enjoyed double-digit gains, increasing 11.1% to $36.3 billion compared with the year-ago period.

Revenues in the pharmacy services segment increased 18.2% to $23.9 billion during the quarter. The increase was primarily driven by growth in specialty pharmacy and pharmacy network claims.

Pharmacy network claims processed during the three months ended March 31 increased 11% to 230.8 million compared to 208 million in the prior year. The increase in the pharmacy network claim volume was primarily due to net new business as well as growth in Managed Medicaid and public exchanges. Mail choice claims processed during the three months increased 2.7% to 20.3 million, compared with 19.8 million in the prior year. The increase in mail choice claims was driven by specialty claim volume and increased claims associated with the continued adoption of our Maintenance Choice offerings.

Noted Merlo, when looking to the 2016 PBM selling season, “We are already off to a solid start in the 2016 PBM selling season. Our integrated model allows us to provide differentiated products and services that generate savings for our clients while providing better health outcomes and convenience for patients. We remain very well positioned with our distinctive, channel-agnostic solutions, which are resonating strongly in the marketplace."

Revenues in the retail pharmacy segment increased 2.9%, or $471 million, to $17 billion during the quarter. Same-store sales increased 1.2% over the first quarter of last year, with pharmacy same-store sales up 4.2% and front store same-store sales down 6.1%.

On a comparable basis, front store same-store sales would have been approximately 800 basis points higher if tobacco and the estimated associated basket sales were excluded from the three months ended March 31, 2014, according to the company. Front store same-store sales were impacted by softer customer traffic, partially offset by an increase in basket size.

Net income for the quarter increased 8.1%, or $92 million, to $1.2 billion, compared with approximately $1.1 billion in the year-ago period. Adjusted earnings per share for the three months ended March 31, 2015 and 2014, was $1.14 and $1.02, respectively, an increase of 12.2%.

Looking ahead, the company raised the low end of its EPS guidance range for the full year 2015. CVS Health now expects to deliver adjusted EPS of $5.08 to $5.19, up from $5.05 to $5.19, and GAAP diluted EPS from continuing operations of $4.80 to $4.91, up from $4.77 to $4.91 in 2015.

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