Pharmacy Services and specialty drugs are CVS Health Corp.’s (NYSE:CVS) catapults to maintaining their strong position
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CVS Health Corp. (NYSE:CVS)’s commitment is to create a platform that provides convenient, affordable, accessible, and high quality care services that span nationwide. This goal has proven to be sufficient enough as figures cannot deny that their performance has catapulted in the Pharmacy Services segment, which they refer to as “PBM,” in the second half of the year. CVS Health Corp. (NYSE:CVS) is yet to release its Q3 2014 earnings on November 4th.
While Walgreen Company (NYSE:WAG) remains to be the largest drugstore chain in the U.S. market, CVS Health Corp. (NYSE:CVS) is confident that they will be able to gain a considerable chunk of share from the market through their Pharmacy Services Segment and in-store clinics that both help with basic healthcare needs.
The company’s revenues saw a slight decline back in Q1 of 2013 and only increased marginally in 2013’s Q2. This year’s secod half saw CVS Health Corp. (NYSE:CVS) bounce back with help of their PBM segment. This year, the momentum has been retained so far, and the first half of 2014 saw an approximately 9% and 14% revenue and net income growth as compared to the same period last year.
Their midpoint revenue guidance also increased by approximately 260 basis points over the guidance in Q2 2014. It is expected for CVS Health Corp. (NYSE:CVS) to maintain its growth momentum. Net revenue is estimated to grow from 8% to 9% with most drive coming from their PBM segment. Their EPS guidance increased from $4.36 – $4.50 to $4.43 – $4.51. Currently, CVS Caremark’s price estimate is at $77 which is around 10% less than the current market price. This is yet to be updated after the company’s release of their Q3 2014 earnings.
CVS Caremark is CVS Health Corp. (NYSE:CVS)’s Services arms. As the only retail drugstore chain to have one, the company has a national network of more than 67,000 retail stores. They also custom design pharmacy service plans for their customers in order to aid them minimize expenses. CVS Health Corp. (NYSE:CVS) ranked first in PBMI’s annual pharmacy benefit manager customer satisfaction report on April 2014 when it came to overall satisfaction. The report was based on a survey which consisted of approximately 65 million members of almost 400 plans sponsors.
As one of their top priorities, CVS Health Corp. (NYSE:CVS) is increasing its focus on developing specialty drugs within its pharmacy service management business. From multiple sclerosis to rheumatoid arthritis to hepatitis C and cancer, specialty drugs are able to treat complex ailments. Currently, 60% CVS Health Corp. (NYSE:CVS)’s PBM segment’s specialty revenue are dispensed through specialty pharmacy.
Year over year in Q1 2014 and Q4 2014, specialty revenew went up 34% and 53%, respectively. The introduction of Coram and Sovaldi drove sales and revenues up during 2014’s first half.
Benefits from new business, the addition of Coram and the introduction of a new specialty drug Sovaldi (a new hepatitis C drug) drove specialty revenue in the first half of 2014.
Specialty drug spending is estimated to quadruple by 2020 according to a report released by the company back in November last year. About 22.5% of the total percentage of drug spending is represented by CVS Health Corp. (NYSE:CVS)’s customers, and the company expects this figure to grow up to 50% come 2018.