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May 01, 2019 07:09 AM

CVS Health's first-quarter earnings get a boost from Aetna

Shelby Livingston
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    AP

    Swallowing up health insurer Aetna helped boost CVS Health's revenue and profit in the first quarter of 2019.

    The pharmacy giant, which closed the Aetna acquisition in November, is starting to realize some financial benefits of the deal in its first full quarter as a combined company. Its revenue increased 34.8% to $61.6 billion over the same period a year ago, driven by the Aetna deal.

    CVS also filled more prescriptions at drugstores and handled more pharmacy claims in its pharmacy benefit management segment. The inflation of brand-name drug prices also helped, it said.

    "Following the close of our Aetna acquisition in late November, our first full quarter of combined operations was a success in many ways. In the quarter we continued to advance our integration efforts while beginning to launch new innovations such as our HealthHUB concept stores," CVS CEO Larry Merlo said in the earnings release.

    During a conference call with investment analysts on Wednesday morning, Merlo said the company is on track to gain $300 million to $350 million in synergies from the merger this year. It is also starting to roll out new products and services as a result of the combination.

    CVS piloted three "HealthHUB" stores in Houston earlier this year and now plans to expand them to the rest of the Houston market. The stores are meant to help manage patients' care in between physician visits by offering a range of healthcare services, digital tools, on-demand health kiosks, and chronic care management services. The Houston stores also include an in-house dietitian who offers personal and group nutrition counseling.

    "These new store formats illustrate how CVS Health is evolving and differentiating to address the changing healthcare landscape," Merlo said. "And while it is early we are very encouraged by the initial results in our Houston stores. The various product and service offerings are performing at or above our expectations."

    CVS' PBM segment grew revenue 3.1% to $33.6 billion because of brand-name drug price inflation and an increase in pharmacy claims thanks to new business and the adoption of CVS' Maintenance Choice program, which steers customers with long-term prescriptions to use CVS pharmacies or mail order delivery.

    The company's retail segment, which fills prescriptions at drugstores and provides services at walk-in clinics and long-term care facilities, grew revenue 3.3% to $21.1 billion, again because of higher prescription volume and the inflation of brand name drug prices.

    CVS' new health insurance segment, which includes its Aetna business, brought in revenue of $17.9 billion in the quarter and served 22.8 million members. Over the fourth quarter of 2018, Medicare Advantage membership grew the fastest at 26.9% to 2.2 million members. The company reported a medical benefits ratio of 84%.

    In total, CVS said the Aetna deal helped boost its net income by 43% to $1.4 billion over the same period a year ago.

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