Stores thriving, PBM 'selling season going great,' Ryan says of CVS Q3

WOONSOCKET, R.I. CVS Caremark announced on Wednesday that third-quarter results were at the higher end of its expectations, and executives expressed optimism for the future as the company continues to focus on retail innovation and clinical programs that reduce costs and improve outcomes.

“In summary, our selling season is going great with strong retention and significant new business wins, and we continue to see acceptance of our unmatched clinical programs. The retail business continues to lead the industry as we continue to innovate and maintain our edge. MinuteClinic is growing significantly, and we have exciting plans to restart the rollout in January; and we are focused on improving efficiency and productivity across our company,” Tom Ryan, chairman and CEO, told analysts during Wednesday morning's conference call. “Lastly, we generated significant free cash flow and are on track to hit our target of $2.5 billion.”

Net revenues for the quarter ended Sept. 30 decreased 3.1% to $23.9 billion.

Net income totaled $809 million, or 59 cents per diluted share, compared with $1.02 billion, or 71 cents per share, in the year-ago period.

Retail pharmacy segment revenues for the three-month period rose 4.1% to $14.2 billion, and total same-store sales rose 2.5%. Pharmacy same-store sales rose 3%, as front-end same-store sales rose 1.4% during the quarter.

Pharmacy services segment revenues decreased 8.5% to $11.9 billion, compared with last year. The decrease was primarily due to the previously announced termination of a few large client contracts, effective Jan. 1, 2010, and the decrease of covered lives under its Medicare Part D program, the company stated. Adjusting the growth rate for the impact of new generics, net revenues would have decreased 1.6% in the segment.

“We are extremely pleased with our success this selling season, with still more prospects in the pipeline [for the pharmacy benefit management business]. I believe this new momentum should continue in the future as we maintain our focus on customer service and as more prospective clients take advantage of our unique breadth of clinical capabilities,” Ryan told analysts. “Pricing is always important, and will continue to be important, but it is more than pricing; it is about service. It's about lower overall healthcare costs and improving outcomes.”

Ryan stated that the company continues to be focused on clinical programs that lower overall healthcare costs, such as its Pharmacy Advisor program for diabetes, which launches in January 2011. The program integrates the benefits of the PBM and the retail pharmacy to identify and counsel members about gaps in care and adherence issues. Member outreach includes educational information, pharmacist-initiated phone calls or face-to-face counseling with a pharmacist at a local CVS pharmacy.

“The program is attracting significant interest from our clients. We currently have 550 clients representing 10 million lives committed to the program,” Ryan said. “We expect to expand Pharmacy Advisor to other conditions in a short period of time.”

The company also reached its target pilot population for the genetic benefit management program, with 1 million lives enrolled. The program will be broadly available in January 2011.

“We believe our investment in Generation Health will be a valuable asset to our clients and our company in the years ahead,” Ryan said. As previously reported by Drug Store News, CVS Caremark partnered with Generation Health to expand pharmacogenomic (PGx) testing to PBM clients to predict how they will respond to medications in such areas as oncology, cardiovascular medicine and HIV.

For 2010, the company narrowed its guidance for adjusted earnings per share to a range of $2.68 to $2.70, from a range of $2.68 to $2.73, in light of costs relating to the PBM streamlining initiative.

The PBM streamlining initiative — which involves streamlining operations, rationalizing capacity and enhancing technology to improve productivity — is expected to generate more than $1 billion in savings over the next four to five years.

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