CVS Health CEO reveals how it will benefit from tax reform

Despite a Justice Department request for more information about its deal with Aetna, CEO Larry Merlo Merlo said on the call he still expects the acquisition to be completed in the second half of the year.

Money bag icon on blackboard with hand

CVS Health is boosting wages and benefits, debt reduction, data analytics, care management solutions, and will invest more in its stores, thanks to the tax cut passed by Congress at the end of last year, CEO Larry Merlo announced on the drugstore giant’s fourth-quarter earnings call.

Merlo noted that the tax cut would add $275 million to the company’s 2018 consolidated operating profits.

Adding some color to CVS Health’s plan to invest in data analytics and care management solutions to improve the way it does business, Merlo said the
company would seek to enhance the role of pharmacy technicians and enhance service offerings.

CVS and Aetna agreed to merge last year. Despite a Justice Department request for more information on the deal, Merlo said on the call he still expects the acquisition to be completed in the second half of the year and noted that the integration planning is underway.

The company enjoyed strong sales and profits last year with Merlo noting on the call that the company came out of 2017 a stronger company. In the three months through December 31, net revenues rose 5.3 percent, or $2.4 billion, to $48.4 billion compared with the same timeframe for the previous year, according to the earnings press release. Revenues in the pharmacy services segment were partly responsible for that growth, according to the CVS Health earnings press release. The company partially credited more generic drug sales for the 9 percent increase in revenues across the segment.

Net income for the 12 months through December 31 soared 24.5 percent to $6.6 billion. Net revenues for the year rose 4.1 percent over 2016 to $184.8 billion.

Merlo also offered some perspective in response to a question on how it would respond to the announcement last week that  Amazon, JPMorgan Chase, and Berkshire Hathaway would form a joint venture to bring down healthcare costs and improve health outcomes for their employees.

“We absolutely agree with the goals set forth in the press release but there were few details…What that group aspires to is what we aspire to with our combination with Aetna. We have demonstrated that we can execute on goals and objectives. We want this new CVS to be an open source model. We are looking forward to partnering with all sorts of [groups] including this new combination…”