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CVS Health 'continues to win, gain share'.

WOONSOCKET, R.I. -- Over the past year CVS Health expanded its extensive suite of assets and capabilities. "These actions allow us to partner more broadly across the health care continuum, creating real value," commented president and chief executive officer Larry Merlo.

The company is working to help enhance access, drive better outcomes and reduce overall health care costs, he said. "With an enterprise focus on these three pillars, we firmly believe that we have the right strategy for an evolving health care market and are very well positioned for sustainable enterprise growth."

CVS Health's know-how in multiple connected areas enables it to drive value for patients, payers and providers, Merlo added.

The company is intent on expanding its core pharmacy business while broadening its reach into new health care channels, he said at the company's analysts day in December 2015. CVS Health is always looking to the future and will continue to launch innovative products, stay ahead of the competition and invest strategically for the long term, he said.

It had a strong 2015, driven by stellar performances across the enterprise and two key acquisitions, Merlo commented. It grew its core business with the acquisition of Target's pharmacies and clinics, and expanded its horizons with the purchase of Omnicare, the leader in long-term-care pharmacy. The first pharmacies in Target operating under the CVS Pharmacy banner debuted in midwinter. CVS Health will finish rebranding 1,672 Target pharmacies around the country on a rolling basis over the next few months.

CVS Health in 2015 also had notable year-over-year growth in revenues, operating profit and earnings per share. As well, the company generated $6.4 billion in free cash flow, exceeding its expectations. Through dividends and share repurchases, it returned more than $6 billion to shareholders.

"We continue to win and gain share across our businesses," Merlo remarked, citing "the outstanding PBM selling season we had for 2016, with gross client wins of $14.8 billion." Also, gains in the fast-growing specialty market continue to outpace the industry.

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What CVS Health has become is a long way from what the company was as CVS Corp. or even CVS Caremark, he noted. "We changed our name for a reason. We are an integrated health care company committed to driving sustainable enterprise growth and enhancing shareholder value, not just through strong earnings but also substantial cash flow and a highly disciplined approach to capital allocation."

Reviewing the achievements of last year, Merlo pointed out that the pharmacy benefit manager had a client retention rate of 98%. "Our unique integrated offerings continue to resonate strongly in the market as payors look for innovative ways to control their pharmacy spend," he said.

In the specialty area, CVS posted revenue growth of 33%. Customer-friendly solutions are allowing the company to succeed in the open patient choice market, and its portfolio of specialty tools is helping payers manage their costs and allowing CVS to win in the payer-directed market, Merlo said.

The company's generics sourcing venture, Red Oak, continues to lift the enterprise, he added. In addition to procurement savings gained through scale and expertise, Red Oak achieves performance milestones entitling CVS Health with additional milestone payments, he said.

The company also has continued to execute on its strategy of growing its core pharmacy business and broadening its base. It entered into a new adjacent dispensing channel, for instance, with the Omnicare acquisition. The deal "expands our customer reach to a broader population of seniors and chronic care patients, and this allows us to provide enhanced continuity of care as these patients transition throughout the health care system," Merlo said.

The company continues to build upon the CVS Health brand, he emphasized. "We are anchored by our purpose of helping people on their path to better health, and we'll continue to play a leadership role in shaping the future of health care," he said.

CVS HEALTH

FINANCIAL RESULTS

(12/31/15) *

NET REVENUES: $153.29 billion (+10%)

NET EARNINGS: $5.23 billion (+12.6%) **

NET MARGIN: 3.4%

FULL-YEAR RETAIL SEGMENT RESULTS (12/31/15) ***

SALES:

$72.01 billion (+6.2%)

SAME STORE SALES: +1.7%

OPERATING PROFIT: $7.13 billion (+5.4%)

OPERATING MARGIN: 9.9%

OPERATIONS

HEADQUARTERS:

Woonsocket, R.I.

FISCAL YEAR-END STORE COUNT: 7,822

PRIOR YEAR-END STORE

COUNT: 7,660

BANNERS:

CVS/pharmacy, MinuteClinic, CarePius, Longs Drugs, Drogaria Onofre, Navarro Discount Pharmacy

RANK

7 in sales

* Results reflect the August 2015 acquisition of Omnicare, Inc., as well as the December 2015 acquisition of Target Pharmacies.

** Earnings are from continuing operations, with results reduced by a net of $582 million in 2015 and $609 million in 2014 from various special items. Including $9 million in income from discontinued operations, net income was $5.24 billion in 2015. This compares with $4.64 billion a year ago, which included a $1 million loss from discontinued operations.

*** Results for 2015 include Omnicare's long-term-care operations.
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Title Annotation:Annual Report: CVS HEALTH
Publication:MMR
Date:May 23, 2016
Words:819
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