CVS reported strong fourth quarter results, largely buoyed by sales in prescription drugs which offset the continual front-end sales erosion that chain retailers (like many brick-and-mortar retailers) are facing.
The report was in line with Street expectations — and stock prices were rewarded accordingly, shares were trading up 2 percent the morning following the earnings update.
Results also got a shot in the arm from two recent patient-centric acquisitions by CVS — Omnicare Inc., and Target Corp.’s pharmacy business. Omnicare works with assisted living facilities to supply prescription drugs, while the Target acquisition expands CVS’s footprint by 1,700 stores.
The increase in sale is aimed at offsetting falling reimbursement rates as increasing numbers of patients are covered through the lower-reimbursing Medicare and Medicaid programs. Private insurers are also looking to lower their prescription drug costs. Last month, Anthem threatened to drop longtime drug benefits manager Express Scripts Holdings Co. unless the firm could find a way to bring them $3 million in savings on drug prices.
CVS says the Anthem move has not affected their long-term plans.
“We’re not really seeing any repercussions or halo to pricing in the marketplace from that event, but I think it continues to be competitive,” Jonathan Roberts, head of CVS’s Caremark business, said on Tuesday’s earnings call.