CVS Health (NYSE: CVS) is the leading health solutions
company that helps people navigate the health care system—and their
personal health care—by improving access, lowering costs and being
a trusted health partner. The company touches millions of lives
with in-home, in-store and virtual care services and is building on
existing relationships to deliver personalized care in a seamless,
full-circle way. The company recently announced a definitive
agreement under which CVS Health will acquire Signify Health, a
leader in health risk assessments, value-based care and provider
- Ranked #4 on the 2022 Forbes list published in
- Market cap of ~$130 billion as of September
- Largest pharmacy in the U.S. based on total
prescription revenue in 2021
- 9,000+ retail locations with more than 1,100 walk-in
- ~74 million COVID-19 vaccines and ~55 million COVID-19
- ~134 million members with Aetna and
- ~4.8 million consumers visit CVS Health locations
- Nearly 9% Total Revenue growth in 2021
- 10% dividend increase beginning in February
Advisor Access spoke with CVS Health’s Executive Vice President
and Chief Financial Officer Shawn Guertin.
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Advisor Access: CVS Health is a large,
diversified healthcare company, #4 on the Fortune 500 list. Please
tell us about the company’s holdings beyond the retail drug stores
that everyone is familiar with.
Shawn Guertin: Our foundational business
primarily comprises three distinct, but increasingly integrated
segments—Health Care Benefits, Pharmacy Services and
Retail/Long-Term Care [LTC].
The Health Care Benefits segment offers a range of insured and
self-insured medical, pharmacy, dental and behavioral health
products and services. The Pharmacy Services Segment provides a
full range of pharmacy benefit management solutions to employers,
health plans, government employee groups and government sponsored
programs. In the Retail/LTC segment, we operate over 9,000 local
touchpoints offering a wide assortment of health and wellness
products and general merchandise, and annually serve over 5 million
long-term care patients. Our community touchpoints offer
prescription fulfillment services, patient care programs, health
care services through walk-in medical clinics, medical diagnostic
testing, vaccination administration, and pharmacy services to
long-term care facilities.
We are constantly enhancing our broad array of offerings to help
people with their health wherever and whenever they need us. We
help people navigate the health care system—and their personal
health care—by improving access, lowering costs and being a trusted
partner for every meaningful moment of health.
AA: CVS Health recently reported strong
second quarter results—total revenues increased 11% compared to the
prior year—and raised its guidance for 2022 full-year earnings per
share and cash flow. To what do you attribute this
SG: Our impressive second quarter performance
reflects strong results and continued positive momentum across all
of our core businesses.
We had a strong quarter in Health Care Benefits with revenue
growth of nearly 11% year-over-year and adjusted operating income
of $1.8 billion. We generated membership growth across all product
lines versus the prior year.
In Pharmacy Services, revenue grew nearly 12% compared to the
prior year and delivered adjusted operating income of $1.9 billion.
Specialty pharmacy revenue was up nearly 21% year-over-year. We are
a leader in specialty pharmacy with programs that drive value in
the marketplace, provide substantive savings to customers and
differentiate us as we pair programs with digital assets.
In the Retail/LTC segment, our deep customer relationships,
high-quality patient interactions, resilient supply chain and agile
operating model all contributed to the strong quarterly
performance. We delivered over 6% revenue growth versus the prior
year and $1.9 billion in adjusted operating income. Our front store
sales grew more than 9%, driven by strength in consumer health
sales, including strong COVID over-the-counter tests and sales of
cough, cold and flu products. Our retail script growth trend is
remarkable as we have consistently increased market share
year-over-year since the first quarter of 2020.
Each segment contributed, meaningfully, to our second quarter
2022 consolidated results and we were pleased to raise our full
year 2022 GAAP and adjusted earnings per share guidance.
AA: How has the pandemic changed
approaches to healthcare, and how has CVS adjusted its strategy to
accommodate changing trends?
SG: The pandemic has forced health care
delivery to evolve rapidly. We are increasingly seeing consumers
attracted to new, more convenient sites of care, such as virtual
and in-home care. We’re also responding to what we’re hearing from
employers in the marketplace where we’re seeing a continued focus
on access, lower cost sites of care, transparency, flexibility,
digital connectivity and really strong service. Increasingly, we
are focusing on using technology to improve the consumer experience
and create greater convenience.
The home health market continues to grow rapidly as a result of
increasing consumer preference for in-home care, accelerated by the
pandemic. The home, specifically, has high impact as a site of care
and is expected to drive better clinical outcomes for many
procedures as well as long-term care.
We are seeing similar trends in the virtual care space. Virtual
care continues to be an important way for consumers to access
alternative sites of care that are affordable and convenient
particularly as it relates to behavioral health services, which
remain elevated since the start of the pandemic.
It’s clear that consumers are increasingly attracted to these
offerings, and members that use these solutions are very pleased
with the experience, as is evident in our results.
AA: CVS Health announced recently
the launch of Virtual Primary Care™, which will give members access
to primary care, on-demand care, chronic condition management and
mental health services virtually, with the option of being seen
in-person when needed at an in-network provider, including
MinuteClinic. How does this build on CVS’ current virtual care
SG: CVS Health has a longstanding history
with virtual care solutions. MinuteClinic, which began piloting
telehealth services in 2015, offers virtual visits for on-demand
general medical and limited mental health services. Aetna has
provided virtual care solutions for the last decade and was the
first to offer a nationwide virtual care solution that allows
members to access primary care and other health services remotely
and in person. Aetna’s virtual care solutions will continue to be
an available option to Aetna plan sponsors. Caremark will introduce
virtual specialty care solutions on the platform in 2023.
CVS Health Virtual Primary Care complements Aetna’s virtual care
strategy currently in the market and MinuteClinic’s virtual and
in-person care solutions. The offering connects CVS Health’s
services, clinical expertise and data for a more coordinated and
consumer-centric health care experience.
With the introduction of CVS Health Virtual Primary Care, Aetna
is offering plan sponsors greater benefit options to meet their
members’ evolving needs. Additionally, Caremark members will now
have a solution that will allow them to access more CVS Health
services and capabilities. By combining health services, a
coordinated care team and clinical data on a single digital
platform, CVS Health Virtual Primary Care will help all members
receive health guidance and care coordination that directs them to
the lowest cost, clinically appropriate care.
AA: What are the greatest areas of
growth for CVS Health?
SG: There are several key opportunities for
growth in the near term and long term, both in our existing
businesses and as we look to grow to execute on our strategy.
In Health Care Benefits, strong continued membership growth
continues to reflect the end-to-end value of our assets,
increasingly working together, one customer at a time, at a
national scale. Our Medicare business remains one of our strongest
growth segments, and we are focused on maintaining above-market
growth in this business. In Pharmacy Services, we are a leader in
specialty pharmacy with programs that drive value in the
marketplace, provide substantive savings to customers and
differentiate us as we pair programs with digital assets.
Importantly, we’re positioned to continue to provide
industry-leading drug trends as well as grow our specialty pharmacy
business. In Retail/LTC, our deep customer relationships,
high-quality patient interactions, resilient supply chain and agile
operating model all continue to contribute to strong performance.
Despite a challenging retail environment, we continue to expand
services and bring new customers to CVS Health.
At our Investor Day conference last year, we announced our plans
to expand our health services offerings in three key categories:
primary care, provider enablement and home health. There are
multiple pathways to achieving growth in these areas and inorganic
growth is certainly part of our strategy. We are continuing to
evaluate complementary health services and care delivery
capabilities to enhance our overall portfolio and are taking a
disciplined approach both strategically and financially. Recently,
we announced a definitive agreement under which CVS Health will
acquire Signify Health, a leader in health risk assessments,
value-based care and provider enablement. This represents a
successful first step in the path towards our strategy, and a great
platform for continued future growth in the areas we’ve
Our vision is to be the nation’s leading health solutions
company for consumers. We’ll continue to make this a reality by
acquiring new primary care assets through enhanced management
services organization (MSO) arrangements and owned primary care
assets. Those practices will be supported by a technologically
enabled health care ecosystem that is not transactional but
integrated across providers and incorporates behavioral health and
social determinants of health inequities directly into primary
care. Ultimately, we aim to deliver a consumer experience that’s as
frictionless as banking or shopping.
AA: CVS Health has set the goal of
sourcing 50% renewable energy by 2040. What steps is the company
taking to meet this goal?
SG: This August, we announced a partnership
with Constellation to enable the expansion of the Mammoth Solar
facility, a large-scale renewable energy project in Indiana, and to
match the electricity use of 309 CVS Health locations in Illinois
and Ohio. This partnership will reduce our carbon footprint by more
than 38,000 metric tons each year. We are continuing to develop our
pathway to annually convert a portion of our energy use to
renewable energy to achieve our goal of sourcing 50% renewable
energy by 2040.
AA: What additional actions has CVS
Health taken to further its sustainability goals?
SG: The health of the environment impacts the
people and communities we serve. We continue to make substantive
progress in advancing our sustainability strategy.
In October 2021, CVS Health was among the first of seven global
corporations to have our target verified by the SBTi’s Net-Zero
Standard. That trajectory sets us on a path to achieve net-zero
emissions from our direct operations by 2048 and across our value
chain by 2050. We are also committed to achieving carbon neutrality
With retail pharmacies, distribution centers, offices and other
facilities across the country, our buildings are a significant
source of our total energy consumption—and, as a result, a primary
focus of our energy conservation efforts. For example, we have
upgraded 100% of eligible stores to energy-saving LED lighting and
are expanding our efforts to update exterior lighting in our retail
We are also optimizing our digital solutions to reduce paper. In
April 2022, we began to offer a new digital receipt prompt at
checkout so customers can choose between a printed receipt, a
digital receipt or no receipt. With the addition of our work to
make our printed receipts shorter, we have seen significant receipt
To solve for the single-use plastic bag, we have invested $5
million in the Consortium to Reinvent the Retail Bag’s three-year
Beyond the Bag Initiative to identify, pilot and implement new
design solutions and models to create an improved customer
experience without unintended environmental consequences. In 2021
and 2022, we piloted dispense-and-return systems for reusable bags.
The lessons learned from these pilots will inform further
iterations of solutions.
Additionally, we strive to reduce the use of plastic and virgin
materials and to ensure recyclability for the packaging of all
Store Brand products. We have engaged the World Wildlife Fund (WWF)
to audit our Store Brand plastic packaging portfolio, and in 2023
we will define a list of problematic or unnecessary packaging and
take steps to eliminate them by 2030.
For more information on our ESG efforts, please see our annual
AA: Is there anything else you would
like investors to know?
SG: We have been thoughtful and deliberate in
setting our vision and strategy for the future, creating a pathway
to achieve low double-digit adjusted earnings per share growth over
time. You can expect CVS Health to deliver strong sustainable
growth in our foundational businesses and additional growth from
our new initiatives. We will also drive meaningful cost
improvements, generate powerful cash flow and deploy capital
We consistently achieve these goals with a commitment to
sustainable business practices. We are a consumer-focused,
purpose-driven company, and our purpose and our people are our
competitive edge. We believe that our success depends on our
diverse and inclusive workforce. In 2021, 58% of new colleagues and
51% of our overall workforce self-identified as racially or
ethnically diverse, more than twice the average of the U.S.
With our unique portfolio of assets, financial strength,
consumer focus and deep health care expertise, we are confident we
will continue to deliver for our members, clients, patients,
customers and stockholders.
AA: Thank you for your
Shawn Guertin is Executive Vice President and
Chief Financial Officer of CVS Health. In this role, Shawn is
responsible for all aspects of the company’s financial strategy and
operations, including accounting and financial reporting, investor
relations, mergers and acquisitions, treasury and capital planning,
investments, risk management, tax, budgeting and planning, and
procurement. Prior to joining CVS Health, Shawn spent eight years
at Aetna where he was Executive Vice President, Chief Financial
Officer and Chief Enterprise Risk Officer. He was the architect of
the company’s finance strategy during a period of rapid growth and
transformation. He helped Aetna enter new markets and grow through
expansion and acquisitions and was a key leader in shaping and
affecting the merger with CVS Health in 2018. During his time in
the role, he was consistently recognized by Institutional Investor
magazine as a top CFO. Prior to joining Aetna in 2011, Shawn served
as executive vice president, CFO, treasurer and chief actuary of
Coventry Health Care. He has also served in leadership roles at
United HealthCare and Travelers. Shawn is a Fellow of the Society
of Actuaries and holds a B.A. from Boston University. He previously
served on the boards of payroll-services firm TriNet Group Inc. and
health care company DaVita Inc. He is an active supporter of
Memorial Sloan Kettering and other charitable causes.
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