CVS Health Q1 net revenues increased 3%
Net revenues for the three months ended March 31, 2017 increased 3%, or $1.3 billion, to $44.5 billion, up from $43.2 billion in the three months ended March 31, 2016.
Revenues in the Pharmacy Services Segment increased 8.5% to $31.2 billion in the three months ended March 31, 2017. This increase was primarily driven by growth in pharmacy network claim volume as well as brand inflation and growth in specialty pharmacy, partially offset by increased generic dispensing and price compression.
Pharmacy network claims processed during the three months ended March 31, 2017, increased 10.5%, on a 30-day equivalent basis, to 376.8 million, compared to 340.9 million in the prior year.
The increase in pharmacy network claim volume was primarily due to an increase in net new business.
Mail choice claims processed during the three months ended March 31, 2017, increased 4.5%, on a 30-day equivalent basis, to 63.7 million, compared to 61.0 million in the prior year.
The increase in the mail choice claim volume was primarily driven by continued adoption of company's Maintenance Choice® offerings and an increase in specialty pharmacy claims.
Revenues in the Retail/LTC Segment decreased 3.8% to $19.3 billion in the three months ended March 31, 2017. The decrease was largely driven by a 4.7% decrease in same store sales, continued reimbursement pressure and an increase in the generic dispensing rate.
Pharmacy same store sales decreased 4.7% and were negatively impacted by approximately 480 basis points due to recent generic introductions. Same store prescription volumes declined 1.4%, on a 30-day equivalent basis, in the three months ended March 31, 2017.
The previously-discussed marketplace changes that restrict CVS Pharmacy from participating in certain networks had an approximately 460 basis point negative impact on same store prescription volumes, while the absence of leap day versus the prior year had an approximately120 basis point negative impact on same store prescription volumes.
Adjusting for both the network changes and leap day, same store prescription volumes would have been 580 basis points higher, and would have increased 4.4% in the quarter on a 30-day equivalent basis.
Front store same store sales declined 4.9% in the three months ended March 31, 2017.
The absence of leap day versus the prior year had a 100 basis point negative impact on front store same store sales, while the shift of the Easter holiday to the second quarter in 2017 from the first quarter in 2016 had a 75 basis point negative impact.
Front store sales were also negatively impacted by softer customer traffic and efforts to rationalize promotional strategies, partially offset by an increase in basket size.
For the three months ended March 31, 2017, the generic dispensing rate increased approximately 140 basis points to 87.0% in company's Pharmacy Services Segment and increased approximately 180 basis points to 87.5% in company's Retail/LTC Segment, compared to the prior year.
For the three months ended March 31, 2017, consolidated operating profit decreased $392 million, or 18.0%.
The decrease was due to the previously-announced restricted networks that exclude CVS Pharmacy as well as continued price compression in the Pharmacy Services Segment and continued reimbursement pressure in the Retail/LTC Segment.
The decrease also reflects a charge of $199 million associated with the closure of 60 retail stores in connection with company's enterprise streamlining initiative.
This was partially offset by a $46 million decrease in acquisition-related integration costs in the three months ended March 31, 2017 versus the same quarter last year.
Net income for the three months ended March 31, 2017 decreased 16.9%, to $953 million.
This was primarily driven by the decline in operating profit, partially offset by lower interest expense of $31 million related to refinancing activity in the prior year as well as the improvement in the effective income tax rate, from 39.4% to 37.3%.
The decrease in the tax rate was largely driven by $19 million in discrete tax benefits related to the required adoption of new accounting guidance for share-based compensation. ■