UPDATE 2-CVS sees profit hit from lower Medicare enrollment
* CVS sees fewer Medicare low-income subsidy enrollees
* Also expects impact from regulatory change
* Combined, moves could cut 2010 EPS by $0.08-$0.11
* Shares fall 1 percent in afternoon trade (Adds Medicare details, analyst comment; updates stock move; adds byline)
By Jessica Wohl
CHICAGO, Oct 2 (Reuters) - CVS Caremark Corp (CVS.N) expects to have about one-third fewer low-income subsidy members enrolled in its two Medicare Part D plans next year, which could reduce earnings by 3 to 4 cents per share.
Medicare is the U.S. federal health insurance plan for the elderly and disabled. Beneficiaries with limited income and resources can get a low-income subsidy that provides financial assistance to help pay for prescription drugs.
CVS had previously said that a regulatory change related to Medicare Part D would cut 2010 earnings by 5 to 7 cents per share. Medicare Part D is the prescription drug option, which is handled through private insurance companies.
Together, these changes could chip 8 to 11 cents per share from next year's profit, the drugstore operator and pharmacy benefits manager said on Friday.
CVS has not yet given a specific 2010 profit forecast. In August, Chief Executive Tom Ryan said he would be disappointed if earnings per share did not rise at least 13 to 15 percent.
CVS said it expects to have about 30 to 35 percent fewer low-income subsidy members enrolled in its Silverscript and Accendo Medicare Part D plans in 2010, based on a preliminary review of results from the Medicare Part D competitive bidding process released by the Centers for Medicare and Medicaid Services, or CMS.
CVS will lose 388,631 Medicare Part D enrollees next year, including low-income subsidy members, according to preliminary estimates issued by CMS on Oct. 1. That is the biggest decline of any participating company. Aetna (AET.N), CIGNA (CI.N), UnitedHealth Group (UNH.N) and Universal American Corp (UAM.N) each stand to gain more than 100,000 members.
CVS said its plans have qualified to receive automatically assigned low-income subsidy members in 15 regions, down from 30 regions in 2009.
"While we are disappointed that we will serve fewer auto enrollees in 2010, the Medicare Part D business will still provide good returns and remain solidly profitable," Chief Financial Officer Dave Rickard said in a statement.
Wells Fargo analyst Matt Perry maintained his 2010 profit forecast, calling for earnings of $2.75 per share.
"Our current estimate calls for 13 percent growth in 2010, which seems reasonable even after the small negative impact from the Medicare drug plan bids," Perry said in a research note.
Shares of CVS fell 1 percent to $35.47 in afternoon trade. (Reporting by Jessica Wohl, editing by Gerald E. McCormick, Gary Hill)
