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CVS Health tops 2Q forecasts

Company downplays help from rebates

CVS Health detailed a better-than-expected second quar­­ter Wednesday and then reassured investors that it doesn’t depend heavily on much-criticized prescription drug rebates that regulators may eliminate.

Shares of the drugstore chain and pharmacy benefit manager climbed after CEO Larry Merlo told analysts that rebates from drugmakers will amount to only about 3 percent of the company’s adjusted earnings this year.

CVS Health runs the nation’s second-largest drugstore chain and processes more than a billion prescriptions a year as a pharmacy benefit manager.

These so-called prescription drug middlemen have taken heat in the debate over rising drug prices, especially over rebates they receive from drugmakers. Critics say those largely secretive agreements play a major role in keeping drug prices elevated, and regulators have talked about eliminating them.

CVS Health said it passes well over 90 percent of its rebates on to its customers, and Merlo added Wednesday that the idea that what it retains affects prescription drug prices is “entirely false.”

In the second quarter, CVS Health actually lost $2.56 billion, due to a hefty charge from its long-term care business. But adjusted earnings, which don’t count such one-time items, came in at $1.69 per share. Revenue rose 2 percent to about $46.7 billion. Both figures beat expectations.

Analysts predicted earnings of $1.61 per share on $46.32 billion in revenue, according to FactSet.

The company booked a $3.9 billion charge in the quarter tied to its long-term care business. It said Wednesday that it has struggled to grow that business after spending more than $10 billion a few years ago to buy Omnicare, which provides pharmacy services to nursing homes and other clients.

For 2018, the company now expects to earn between $6.98 and $7.08 per share this year, better than the per-share projection of between $6.87 and $7.08 that the company put out in May.

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