CVS Profit Rises, Helped by Pharmacy Strength -- Update

By Sharon Terlep 

CVS Health Corp.'s business model of putting drug insurance and pharmacies under the same roof paid off in its most recent quarter.

Sales in the company's pharmacy-services segment rose 18% to $31.3 billion. Pharmacy-benefit managers, which include CVS Health's Caremark, operate as middlemen between insurance companies, corporations that pay for health coverage, drugmakers and pharmacies.

By owning Caremark as well as thousands of drugstores, CVS Health has been able to closely align both businesses to encourage patients to fill their prescriptions somewhere within the CVS empire.

The results underscore the threat looming this year as rivals of the largest U.S. drugstore chain move to launch competing businesses. Walgreens Boots Alliance Inc. recently struck two health-plan partnerships that exclude CVS drugstores, which contributed to CVS's warning in November that it expects to lose more than 40 million retail prescriptions to other pharmacy chains.

CVS forecast weak growth for this year as a result, which it maintained on Thursday. CVS shares fell 0.4% to $76.70 in afternoon trading.

In a call with analysts, CVS Chief Executive Larry Merlo said the company is looking for ways to use other services, such as its chain of walk-in medical clinics, as a way to draw more pharmacy-benefit business.

Sales in CVS's retail segment rose more modestly than in the pharmacy business, up 4.7% to $20.8 billion for the quarter ended Dec. 31. Reduced traffic caused same-store sales to decline 0.7% compared with a year earlier, while pharmacy same-store sales rose 0.2%.

CVS reported a profit of $1.71 billion, or $1.59 a share, up from $1.5 billion, or $1.34, a year earlier. Excluding items such as acquisition-related costs, earnings rose to $1.71 a share from $1.53. Revenue jumped 12% to $45.97 billion.

Write to Sharon Terlep at [e-mail]

(END) Dow Jones Newswires

February 09, 2017 13:37 ET (18:37 GMT)

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