CVS Health Eyes Data, Wage Boosts With $1.5B Tax Benefit

Gene J. Puskar, AP File Photo
Jan. 18, 2017 file photo.

RHODE ISLAND – CVS Health's fourth-quarter earnings nearly doubled, fueled by a $1.5 billion tax benefit that will help the drugstore chain expand its growing role in customer care.

The company said Thursday that it will use the break it gets from the recently completed federal tax overhaul to raise starting pay for its hourly workers and pare debt ahead of its planned, $69 billion acquisition of the insurer Aetna.

It also will pump more money into data analytics. This technology can help the company track prescription drug use or monitor data like blood tests to determine if a patient's health or a condition is growing worse. That can cut health care costs by helping pharmacists or other care providers intervene before a big medical expense like a hospital stay hits.

The potential for greater data use is a big reason CVS said in December it would buy Aetna Inc., which covers more than 22 million people as the nation's third-largest health insurer.

Company leaders envision turning the chain's 9,800 stores into a one-stop-shop for health care, a place where patients can get their vision tested, their blood sugar monitored and also see a nurse practitioner and fill a prescription. The CVS-Aetna combination can then use the information it gets from all these visits to guide care and keep customers coming back.

The help slated for data analytics is the "most exciting investment" CVS will make from its tax-cut windfall, said Neil Saunders, an analyst for GlobalData Retail.

"We believe that this, along with more health services in stores, will give CVS a much more significant role in the (health care) sector," he said in a research note.

CVS also announced Thursday that it was raising its starting wage for hourly workers to $11 an hour from $9. It will not increase health insurance premiums for the 2018-2019 plan year, and it will start a parental leave program that gives full-time employees with a new baby four weeks off at full pay.

Several other companies also have announced employee bonuses or enhanced benefits since Republican lawmakers and President Donald Trump sped a $1.5 trillion tax cut plan into law at the end of last year. While many businesses attribute their beefed up compensation to the tax law changes, larger employers also are having a hard time attracting and keeping workers because of historically low unemployment rates.

CVS Health runs the nation's second-largest drugstore chain and also processes more than a billion prescriptions annually as a pharmacy benefit manager, or PBM.

In the fourth quarter, the company earned $3.29 billion. Results adjusted to exclude the tax break totaled $1.92 per share. Revenue climbed 5 percent to $48.38 billion.

That topped expectations on Wall Street, where analysts expected earnings of $1.89 per share on $47.54 billion in revenue, according to FactSet.

The company's PBM side, which processes prescription claims for insurers, large employers and other clients, saw revenue increase more than 9 percent to $34.2 billion in the fourth quarter. Meanwhile, revenue from the business segment largely made of drugstores came in nearly flat at around $21 billion.

Overall sales from established stores also were flat and fell in the front end, or the area outside the store pharmacies. That's an important metric because it excludes the impact of stores that have opened or closed recently.

For the full year, CVS Health pulled in a profit of $6.62 billion on nearly $185 billion in revenue.

The company is not offering a 2018 earnings-per-share forecast due to the pending Aetna deal.

Shares of Woonsocket, Rhode Island-based CVS Health Corp. slumped nearly 3 percent, or $2.03, to $72.32 in afternoon trading on another down day for broader indexes Thursday.

-By Tom Murphy, AP Health Writer

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