CVS Health CEO and President Larry Merlo announced plans for his future retirement on Friday, with Aetna President Karen Lynch slated to take the helm in February. The planned transition will take place as the retail giant continues to combine its respective businesses and add new Covid-19 testing sites. Here are four takeaways from Friday’s earnings call:
- Covid-19 testing draws new customers to CVS stores
CVS Health has opened 4,000 Covid-19 testing sites and plans to add more by the end of the year. So far, it has administered more than six million tests to date.
“If we told you a year ago that to date, six million people would have gone to their local CVS Pharmacy for a diagnostic test related to some virus, we’d probably get an eyeball roll,” CEO Larry Merlo said in a Friday earnings call. “The reality is, that happened. And it really speaks to the strategy that we’ve talked about, in terms of meeting people where they are.”
Like many of its peers, CVS also began offering testing services for companies and schools. So far, it has drummed up more than 70 clients for its Return Ready service.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
In an investor call on Friday, CVS CEO Larry Merlo said testing has also brought some new customers to the company. 70% of those tested at its pharmacies and 40% of its business clients were not previously CVS customers.
Merlo had less specifics to share about the company’s plans for administering a potential Covid-19 vaccine. The Department of Health and Human Services announced that it would work with CVS and Walgreens to administer vaccines to residents of long-term care facilities, but no vaccine has yet received an emergency use authorization.
- CVS continues to focus on HealthHUB strategy, but the pandemic has slowed openings
Last year, CVS Health announced plans to open 1,500 HealthHUB stores by 2021 — a remodeled version of its stores with more space dedicated to health services. In addition to more exam space for CVS’ MinuteClinics, the concept stores include phlebotomy services, a wellness space for fitness or nutrition classes, and more shelf space dedicated to health products.
A big part of the strategy is offering more services for patients with chronic conditions. So far, Merlo said the company had seen nearly twice as many MinuteClinic visits for chronic services, a total of 16%. Next year, CVS plans to offer in-person behavioral health services at these sites.
The pandemic has slowed the company’s plans a little bit. Now, CVS hope to have 1,300 open by the end of the year. It currently has 450 HealthHUBs in 30 states.
- Prescription sales fluctuate; cough and cold sales down
As patients went in for fewer appointments during the early months of the pandemic, CVS saw a dip in new prescriptions. But in September, the company saw an uptick in activity as members refilled 90-day prescriptions, Lisa Gill, a managing director and senior analyst for JP Morgan, wrote in a research note.
Meanwhile, as the public heeded advice to get a flu shot, flu vaccines spiked in September and October. Notably, sales for cough and cold products at the front of stores were down. MinuteClinic visits and prescriptions for flu-like symptoms were also lower compared to last year, CFO Eva Boratto said.
- Medicare Advantage continues to be a big focus
With open enrollment now underway, Aetna — and many other insurers — will be pushing to gain more Medicare Advantage members. As of September, the CVS subsidiary had 2.69 million Medicare Advantage members, an increase from 2.3 million at the same time last year.
For 2021, Aetna introduced a new low-cost Medicare part D plan, which it expects could grow its Medicare Advantage membership in the future.
“The product is designed for a certain set of individuals that we believe can ultimately and will be interested in moving to Medicare,” Lynch said in an earnings call.
This year, the company is on track to convert more than 40,000 part D plan members to a Medicare Advantage plan, Merlo said.
The company also has seen significant growth in its Medicaid membership, up 5.2% from the second quarter. Lynch said a big part of that was due to states suspending eligibility redeterminations during the pandemic.
“We expect to continue to see unemployment. We expect to see increases in Medicaid enrollment as a result of that as well,” she said. “Medicaid is an important business for us. It does have the opportunity for growth. It is strategically positioned as an important business and we hope to continue to grow that asset.”
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