By Phil Wahba
Nov 5 CVS Caremark Corp raised its
profit forecast for the year on Tuesday, as sales grew at its
drugstore chain and it processed more prescriptions from new
The company also said it expects private health insurance
exchanges to help business next year.
Shares were up 2.4 percent at $63.44 in late-morning trade.
CVS, which operates the No. 2 U.S. drugstore chain and a
major pharmacy benefits management business, reported total
revenue rose 5.8 percent to $31.97 billion in the third quarter.
Wall Street analysts expected $31.53 billion, according to
Thomson Reuters I/B/E/S.
Looking ahead to 2014, CVS said its participation in public
and private health insurance exchanges should lift revenue in
2014. The company will provide a more detailed forecast for 2014
and beyond at its analyst day on Dec. 18.
Still, CVS Caremark Chief Executive Larry Merlo told
investors on a conference call that the company expects large
employers to take a "wait-and-see" approach to private health
insurance exchanges, especially for active employees, based on
his conversations with clients and private exchange operators.
Merlo also said large employers may choose to move retirees
to the exchanges over time.
Private exchanges mimic the coverage mandated under the U.S.
Affordable Care Act and allow a company's employees to choose a
plan from multiple insurers, a sign of the shifting landscape
for corporate healthcare because of rising costs.
CVS, whose Caremark PBM unit competes with Express Scripts
Holding Co, said it has completed 75 percent of
renewals for the 2014 selling season and has won $1.8 billion in
new contracts, net of attrition in its business processing
prescriptions for beneficiaries of Medicare Part D. The federal
program subsidizes the cost of prescription drugs for seniors.
In August, CVS said it expected to lose about 10 percent of
patients enrolled in one of its Medicare prescription drug plans
because of a marketing ban imposed earlier in the year by the
Centers for Medicare and Medicaid Services.
The CMS ban on some Medicare Part D plan activity arose in
January after CVS converted to a new enrollment system, which
led to service problems, such as an increase in calls and
problems in processing claims. In some instances, patient claims
could not be processed at pharmacies.
Merlo reiterated his belief that CVS will have the problems
fixed by the end of 2013.
RAISES 2013 PROFIT FORECAST
Revenue in pharmacy services rose 7.8 percent in the
quarter, primarily because it processed more claims with new
In CVS' retail business, sales at stores open at least year
were up 3.6 percent, as it filled more prescriptions. But CVS
reported a small decline in comparable sales of general
merchandise due to "softer traffic."
"We have seen the promotional environment intensify," Merlo
told analysts on the call.
CVS rival Walgreen Co has reported that sales rose
in October but traffic fell 0.6 percent.
CVS, which also competes with Rite Aid Corp, earned
$1.25 billion, or $1.03 per share, in the quarter, up from $1
billion, or 80 cents per share, a year earlier.
Excluding items such as a gain from a legal settlement,
adjusted profit came to $1.05 per share, 3 cents better than
Wall Street expected.
CVS now sees posting adjusted earnings per share of $3.98 to
$4.01 this year, versus its prior forecast of $3.90 to $3.96.