New CVS/Caremark gets record results

WOONSOCKET, R.I. —In typical CVS fashion, the pharmacy retailer posted record revenues and earnings for the second quarter—a quarter that was undoubtedly on the radar screen of industry observers since it marked the first full quarter with Caremark.

“Our second-quarter performance once again demonstrates that we certainly kept our eye on the ball and, better yet, we kept our eye on our customers,” Tom Ryan, president and chief executive officer of CVS, told analysts during a conference call earlier this month to discuss results.

CVS has “virtually” completed its integration of Caremark, which initially focused on three areas: the integration of PharmaCare into Caremark, the integration of Caremark into CVS at the corporate level and the development of its new Go-To-Market strategy with new products and services, such as flexible fulfillment, improved generic and formulary compliance at both mail and retail, in-store pick up of mail-order pharmacy and unique OTC opportunities.

“We will begin to create a single view of the patient from a broad-based health management program perspective,” Ryan said. “These programs will result in the highest quality health and pharmacy services that will continue to lower payer’s overall healthcare costs.”

Examples that include unique disease management that utilize Care-mark products and call centers, along with CVS pharmacists and Minute-Clinic nurse practitioners.

Looking ahead, CVS provided several positive revelations as it offered an update on the 2008 PBM selling season.

“Aside from the [Federal Employee Program] and [the state of New York] contracts, very little additional business has been lost,” noted Goldman Sachs analyst John Heinbockel. “In addition, more than $1 billion in new contracts has been won with the potential for another $1 billion to be brought on board before the season ends. The full-year retention rate should be 90 percent, in line with the historical average.”

Furthermore, the company now expects that merger synergies will significantly exceed $500 million in 2008.

For the quarter ended June 30, net earnings increased 114.1 percent to $723.6 million.

Revenues increased $10.1 billion to $20.7 billion, up from $10.6 billion during the year-ago period. Same-store sales for the quarter (which do not include Sav-on/Osco stores) rose 5.7 percent. Pharmacy same-store sales also rose 5.7 percent, while front-end same-store sales increased 5.9 percent.