CVS Health Corp.’s newly acquired health insurer, Aetna, helped it weather abrupt shifts in consumer behavior during the pandemic, resulting in better-than-expected second-quarter results for CVS and a boost in its full-year forecast.
People have skipped doctor visits and postponed elective surgeries throughout the COVID-19 pandemic, sending Aetna’s medical benefit ratio down to 70.3% from 84% a year earlier. Revenue for the health-care benefits segment jumped 6% to $18.5 billion, CVS said in a statement Wednesday. The Woonsocket, Rhode Island-based company acquired Aetna in 2018 for $68 billion.
Shelter-in-place restrictions kept people at home after the mad dash to stock up on toilet paper and prescriptions in the spring. Same-store sales in the front of the store fell 4.5%, and the number of prescriptions filled decreased 1.1%. Pharmacy same-store sales rose 4.6%.
New business helped CVS’s pharmacy services units, which includes CVS’s pharmacy-benefit manager, overcome fewer new prescriptions. Pharmacy same-store sales rose 4.6%.
CVS has grown beyond a drugstore to include a pharmacy-benefit manager and a health insurer. Executives touted the quarterly results as evidence that its strategy is paying off.
“Our earnings in this environment demonstrate the strength in our strategy and the power of our diversified business model,” CVS Chief Executive Officer Larry Merlo said on a call with analysts reviewing the results.
The company raised its full-year adjusted earnings forecast to between $7.14 to $7.27 a share, up from the previously guided $7.04 to $7.17 a share.
CVS’s second-quarter adjusted earnings of $2.64 and revenue of $65.3 billion beat analysts’ expectations of $1.91 a share and $64.2 billion, respectively, according to Bloomberg consensus estimates.
CVS shares rose 0.5% in New York trading. They had slid about 12.5% this year to $64.98 as of Tuesday’s close.
While COVID-19 has presented challenges to CVS, it has also created opportunities. The company has opened more than 1,800 drive-through test sites at its stores. About 40% of people being tested are not CVS customers, providing the company the chance to reach new people, Merlo said.
CVS anticipates it will administer 18 million flu shots this season, more than previous years, according to Merlo. Health officials are planning a bigger push than usual in hopes of preventing another crisis. The company is also in talks with the Trump administration about plans for administering a COVID-19 vaccine when one becomes available, Merlo said.
Earlier this summer, CVS introduced a program called Return Ready to help employers and universities devise testing strategies, as well as other programs like contact tracing. Merlo said CVS has signed more than 40 clients and has more than 1,000 prospects.
In its quarterly filing, CVS outlined several downsides it anticipates related to COVID-19, including less prescription drug use with people skipping visits to their doctors, fewer front-store sales amid shelter-in-place orders and higher unemployment and a decrease in commercial insurance members due to companies laying workers off or folding entirely, as well as an unwillingness of prospective clients to switch carriers.
At the same time, CVS reported $27 million of uninsured store damage and inventory losses from “civil unrest” across the U.S. in the second quarter, which ended June 30. Demonstrations, most of which were peaceful, surged across the U.S. in May following the killing of George Floyd by police in Minneapolis. Some were accompanied by looting.
CVS operates about 9,900 stores across the country.