Against the backdrop of a federal lawsuit that alleges overcharging for its generic drugs, CVS Health announced rosy financial results for the second quarter of 2015.
Outcry over drug cost transparency has dogged the entire pharmaceutical industry and has even led to calls for legislation in some states. CVS isn't immune, and the suit alleges inflated prices led to co-pays for customers that exceeded what they would have paid for the drugs if they had no insurance and participated in CVS' Health Savings Pass discount program. The program offers discounts on generic versions of hundreds of prescription drugs, including penicillin and the antidepressant Prozac, according to the suit.
The Woonsocket, R.I.-based company announced a 7.4% net revenue increase in second quarter 2015 over the same period a year ago, an increase buoyed by rising generic drug dispensing. The generic dispensing rate increased approximately 1.5% in the second quarter of 2015 from the prior year in both the pharmacy services segment and retail pharmacy segment. The rate rose to 83.9% in the pharmacy services segment and 85% in the retail pharmacy segment, the company said.
Overall, revenue in the pharmacy services segment increased 11.9% in the second quarter over the prior year, the company said. Pharmacy network claims processed during the three months ended June 30 increased 8.7% compared to the prior year. The boom in pharmacy network claim volume was primarily due to net new business, as well as growth in managed Medicaid, the company said. Revenue in the retail pharmacy segment grew as well, seeing a 2.2% uptick to $17.2 billion in the second quarter.
Net income increased 2.1% in the quarter over the same period a year ago. That number includes $21 million in transaction costs and $36 million in pretax acquisition-related financing costs related to the proposed Omnicare and Target deals. Excluding those costs, net income increased 4.9%.
"I'm very pleased to report second-quarter results that exceeded our expectations,” said Larry Merlo, president and CEO. “On an underlying basis, we surpassed the high end of our guidance range by two cents, as operating profit in the retail business exceeded our expectations while operating profit in the PBM was in line with our guidance.”
CVS narrowed guidance for the full year 2015 and now expects to deliver adjusted earnings per share of $5.11 to $5.18, from $5.08 to $5.19. The adjusted earnings per share guidance excludes the $21 million effect of acquisition-related transaction and financing costs that have been recorded.
During the second quarter, CVS opened 25 new retail drugstores, closed five and relocated 16 others. The company operated 8,028 locations in 47 states, the District of Columbia, Puerto Rico and Brazil as of June 30.
