Tags: CVS | Lowers | Forecast | pharmacy | Benefits | Unit | Revamp

CVS Lowers Forecast on Pharmacy Benefits Unit Revamp

Wednesday, 03 Nov 2010 12:00 PM

CVS Caremark Corp. posted lower quarterly earnings and cut the high end of its full-year earnings forecast as it revamps its pharmacy benefits management business, sending its shares lower.

The large U.S. drugstore chain and pharmacy benefits manager cut the top end of its earnings-per-share forecast for the full year to $2.70 from $2.73 while keeping the low end at $2.68, citing costs to streamline its PBM unit.

Helene Wolk, an analyst with Sanford Bernstein, said the new CVS forecast was consistent with her estimates, but it appeared to include costs that were originally expected to hit in 2011 and 2012. Shares of the company fell 1.7 percent premarket.

Pharmacy benefits managers, or PBMs, administer prescription drug benefits for employers and health plans and also operate mail-order pharmacies.

The CVS pharmacy chain acquired the Caremark PBM in 2007, though the combination of the retail and PBM models has been criticized by investors as failing to provide the benefits initially laid out.

In addition, the entire PBM industry has taken several hits this year due to reimbursement pressures.

After losing several billion dollars worth of PBM contracts last year, CVS said its annual campaign this summer to drum up new business was successful.

CVS won $8.7 billion in net new PBM business for 2011, the bulk of it from a 12-year deal signed in July to manage benefits for about 9.7 million Aetna Inc members.

"Our PBM offerings continued to gain traction with clients as evidenced by the year-to-date results of the 2011 selling season," Chief Executive Officer Tom Ryan said in a statement. "We have begun to make important investments in the PBM streamlining initiative, which will lead to improved results and higher returns in the coming years."

Net income from continuing operations for the quarter ended Sept. 30 fell to $809 million, or 60 cents per share, from $1.02 billion, or 71 cents a share, a year earlier.

Excluding items, CVS earned 65 cents per share from continuing operations, meeting Wall Street expectations, according to Thomson Reuters I/B/E/S.

Revenue was down 3.1 percent to $23.88 billion, with an 8.5 percent revenue decline for the PBM offsetting an improved quarter for the company's retail pharmacy business.

CVS also noted that it beat its competitors with same-stores sales that rose 2.5 percent for the quarter.

Meanwhile, rival Walgreen Co. said Wednesday that its same-store sales fell 1.3 percent in October. Smaller chain Rite Aid saw same-store sales fall 1.7 percent for the month.

© 2017 Thomson/Reuters. All rights reserved.

 
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CVS Caremark Corp. posted lower quarterly earnings and cut the high end of its full-year earnings forecast as it revamps its pharmacy benefits management business, sending its shares lower. The large U.S. drugstore chain and pharmacy benefits manager cut the top end of its...
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2010-00-03
Wednesday, 03 Nov 2010 12:00 PM
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