CVS Profit Rises, Helped by Pharmacy Strength -- Update
February 09 2017 - 01:52PM
Dow Jones News
By Sharon Terlep
CVS Health Corp.'s business model of putting drug insurance and
pharmacies under the same roof paid off in its most recent
quarter.
Sales in the company's pharmacy-services segment rose 18% to
$31.3 billion. Pharmacy-benefit managers, which include CVS
Health's Caremark, operate as middlemen between insurance
companies, corporations that pay for health coverage, drugmakers
and pharmacies.
By owning Caremark as well as thousands of drugstores, CVS
Health has been able to closely align both businesses to encourage
patients to fill their prescriptions somewhere within the CVS
empire.
The results underscore the threat looming this year as rivals of
the largest U.S. drugstore chain move to launch competing
businesses. Walgreens Boots Alliance Inc. recently struck two
health-plan partnerships that exclude CVS drugstores, which
contributed to CVS's warning in November that it expects to lose
more than 40 million retail prescriptions to other pharmacy
chains.
CVS forecast weak growth for this year as a result, which it
maintained on Thursday. CVS shares fell 0.4% to $76.70 in afternoon
trading.
In a call with analysts, CVS Chief Executive Larry Merlo said
the company is looking for ways to use other services, such as its
chain of walk-in medical clinics, as a way to draw more
pharmacy-benefit business.
Sales in CVS's retail segment rose more modestly than in the
pharmacy business, up 4.7% to $20.8 billion for the quarter ended
Dec. 31. Reduced traffic caused same-store sales to decline 0.7%
compared with a year earlier, while pharmacy same-store sales rose
0.2%.
CVS reported a profit of $1.71 billion, or $1.59 a share, up
from $1.5 billion, or $1.34, a year earlier. Excluding items such
as acquisition-related costs, earnings rose to $1.71 a share from
$1.53. Revenue jumped 12% to $45.97 billion.
Write to Sharon Terlep at sharon.terlep@wsj.com
(END) Dow Jones Newswires
February 09, 2017 13:37 ET (18:37 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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