CVS Health Corp (CVS)

“On 340B, we're confident in our 2026 guide for Health Services due to the broader strength across the business.”

“I would reiterate, confident in our ability to generate highly attractive earnings growth at the enterprise level next year in 2027.”

“I'll take you back to Investor Day, and we always saw multiple pathways to achieving our target of a mid-teens EPS CAGR. And I think if you look at this year, Mike, based on the strength of our performance across the enterprise, we remain very confident in our commitment through 2028.”

“So putting the pieces together across the enterprise, we remain confident in the mid-teens adjusted EPS CAGR from 2025 through 2028 that we outlined at our Investor Day.”

“As you can see, we are making meaningful progress unlocking our embedded earnings power and continue to feel confident in the mid-teens adjusted EPS CAGR from 2025 through 2028 that we laid out at our recent Investor Day.”

“Later this year, through our new partnership with Eli Lilly, eligible Zepbound and Foundayo patients will be able to access cash pay pricing for same-day pickup directly through CVS Health's app or in our stores.”

“We are also updating our full year expectation for cash flow from operations to at least $11.5 billion, a meaningful increase of $2 billion from our prior guidance.”

“Building on this strong performance so far this year, we are raising our full year 2026 adjusted earnings per share guidance by $0.60 to a range of $7.90 to $8.10.”

“We assumed a continuation of the elevated trend as we put our bids in, and with our leading star scores we believe we'll be well positioned to make continued progress towards appropriate margins in 2027 while delivering a great experience and good health outcomes for our members.”

“Our strong medical cost management approach has been producing strong momentum in this business for 2026, and we expect that to continue.”

“At this point in the year, we're trending to a retention rate that's slightly lower than our historical performance, but more consistent with industry norms.”

“We did experience some pressure from 340B in the quarter and now expect that to be a headwind as we go into next year.”

“As a reminder, we've only reflected the offset of dilution in our long-term expectations.”

“I think a reasonable floor for 2027 for adjusted EPS could be $8.44, and that's obviously consistent with current consensus.”

“This represents EPS growth of about 13% off an adjusted baseline of $7.46.”

“While we would not normally comment on 2027 consensus this early in the year, an outlook of at least $8.44, consistent with current consensus appears reasonable at this juncture.”

“These headwinds will be partially offset by our industry-leading specialty pharmacy business, which continues to benefit from strong execution and secular trends in the market, including a robust generic portfolio in 2027.”

“Additionally, we believe we will see membership declines in Caremark next year.”

“In our Pharmacy Services business, we expect the previously discussed market dynamics in our 340B business to continue and result in a headwind in 2027.”

“We are seeing significant momentum in Aetna's margin recovery, including the more than $2 billion of improvement in adjusted operating income that we've already delivered this year. The actions we have taken to strengthen our foundation and improve our performance are working, and we expect this momentum to continue on our pathway back to target margins over the next couple of years.”

“Consistent with our historical approach, we intend to share 2027 headwinds and tailwinds on our third quarter call and detailed full year guidance on our fourth quarter call.”

“We now expect the increase between our first quarter and fourth quarter MBR in our Health Care Benefits business to be slightly higher than 950 basis points after adjusting for the impact of prior year development in the first quarter.”

“We expect second half EPS to be more weighted to the third quarter, reflecting typical seasonality.”

“As a reminder, our current outlook does not assume any share repurchases this year.”

“In aggregate, we now expect full year enterprise adjusted operating income to be in the range of $16.58 billion to $16.92 billion.”

“In our Pharmacy and Consumer Wellness segment, we now expect full year adjusted operating income of at least $6.4 billion, an increase of $220 million from our prior guidance.”

“We now expect a full year MBR of 89.75%, plus or minus 25 basis points.”

“In our Health Care Benefits segment, we now expect full year adjusted operating income to be in a range of $5.03 billion to $5.37 billion, an increase of over $1 billion relative to our prior guidance.”

“We now also expect our full year total revenues to be at least $414 billion.”

“Our leverage ratio at the end of the quarter was approximately 3.5x, and we expect to drive further improvement as we continue to execute against our 2026 outlook.”

“We've recently launched a new AI-enabled claims assist manager, which will reduce our processing time by over 20% and accelerate payment for providers on hundreds of millions of claims every year.”

“Early feedback has been encouraging, and we are excited to expand access later this year.”

“We believe the ability to maintain margins at historical levels is how we see this business evolving in the industry over the long term.”

“We recently announced that on July 1, 2026, we will exclude branded STELARA from our commercial template formularies to be replaced with the low-cost, effective biosimilars.”

“Lisa, we remain confident in our ability to deliver mid-teens EPS CAGR through 2028.”

“And yes, I'll just reaffirm our confidence in hitting target margins in 2028.”

“So look, we're going to take the same disciplined approach going into 2027, and feel confident that we can continue the momentum and again, make meaningful progress towards target margins in 2027.”

“Later this year, we will be launching Health100, an AI native, state-of-the-art technology and service platform that allows for any payer, PBM, pharmacy or provider to seamlessly connect.”

“Our strong first quarter performance gave us the confidence to increase our full year 2026 adjusted earnings per share guidance to a range of $7.30 to $7.50, up from the previous range of $7 to $7.20.”

“So as we look at the back half of this year, we're pleased with the rebate guarantee performance to date, and our expectations is that this is reflected in our 2026 outlook with no surprises.”

“Our updated CVS Pharmacy guidance now already reflects an over 2% increase in earnings for 2026.”

“We now expect a roughly 60-40 split of earnings between the first half and second half.”

“In aggregate, we now expect full year enterprise adjusted operating income to be in the range of $15.53 billion to $15.87 billion.”

“In our Pharmacy & Consumer Wellness segment, we now expect full year adjusted operating income of at least $6.18 billion, an increase of approximately $90 million from our prior guidance.”

“We continue to expect a full year MBR within our previous guidance range of 90.5%, plus or minus 50 basis points.”

“In our Health Care Benefits segment, we now expect full year adjusted operating income to be in a range of approximately $4 billion to $4.34 billion, an increase of $420 million relative to our prior guidance, reflecting the favorable prior year development that we experienced in the first quarter.”

“We are also updating our outlook for full year cash flow from operations to at least $9.5 billion, reflecting improved underlying performance, primarily related to working capital.”

“We now expect our full year total revenues to be at least $405 billion.”

“We expect to drive further improvement this year as we execute against our 2026 guidance.”

“we rallied and worked with key industry peers through AHIP to commit to standardize the services for the most common prior authorizations, which represent over 50% of the PA volume by the end of this year.”

“we expect to achieve similar conversion rates and for the majority of our customers to pay $0 out of pocket for this therapy.”

“We have clear line of sight to improved performance in Health Care Delivery, in Oak Street Health in 2026, and we'll continue to make progress in future years.”

“We are going to build on the momentum in 2026 and continue to drive the Medicare business back to target margins.”

“So this business returns to target margin as well.”

“So this business is going to advance towards its recovery to target margin in 2026.”

“And we do not see this impacting our long-term enterprise guide that we provided in December during the Investor Day.”

“Today, we are reaffirming our guidance for full year 2026 revenue of at least $400 billion, as well as our expectation for full year 2026 adjusted EPS in a range of $7 to $7.20.”

“We expect stable margins in our Medicaid business.”

“We expect, as Brian said, progress in the Medicare business as we continue to strengthen that and that will be a meaningful driver of margin improvement overall Aetna, not just in 2026, but I believe in 2027 as well.”

“And then lastly, in Commercial, we've maintained pricing discipline. And as a result, I think you can expect performance in '26 will remain strong.”

“In Medicare, we expect another year of margin improvement driven by a rational disciplined approach to pricing in our individual and PDP products and repricing in our group MA business.”

“Look, the Medicaid business has been performing in line with our expectations. We had a really strong year of rate advocacy execution in 2025, and we're going to continue that focus and discipline there.”

“Fully insured remains pressure just due to the disciplined pricing approach. We're going to continue to be really disciplined in our pricing across all parts of this business, but that's been more than offset by growth in the self-funded business.”

“I think the overperformance and growth that we saw in '25 and then as we will continue to grow in '26, it's a result of better-than-expected retention.”

“We're excited about the shift to greater transparency and believe this recent legislation will accelerate adoption of TrueCost.”

“We think '25 proved that we've made meaningful progress. We expect to continue with that progress into '26.”

“As a reminder, we expect the increase between first quarter and fourth quarter MBR to be approximately 850 basis points in 2026, which is slightly steeper than the initial expectations we provided for 2025.”

“While our expectation for 2026 operating cash flow is down slightly, when combined with the higher cash flow we delivered in 2025, our cumulative cash flow expectation across 2025 and 2026 has increased by over $1.5 billion.”

“We expect to drive further improvement in our leverage this year as we continue to improve enterprise earnings.”

“We entered 2026 with significant momentum and expect this year to be another strong step forward on our path to target margins.”

“we are increasing our full year 2025 adjusted earnings per share guidance to a range of $6.55 to $6.65, up from our previous range of $6.30 to $6.40.”

“I would just say, we expect to exit AEP roughly flat in our individual Medicare Advantage membership.”

“We're more than 60% complete and targeting 100% of our eligible book by the start of 2026.”

“Yes. No, just, Justin, in terms of the outlook, the strong performance Prem talked about in the quarter, we lifted our guide for the segment and it's now sitting at a growth of 3% for the year.”

“Additionally, we now expect our full year adjusted effective tax rate to be 25.3%, an improvement of 40 basis points.”

“We are also increasing our expectations for full year cash flow from operations to be in a range of $7.5 billion to $8 billion.”

“In aggregate, we now expect full year enterprise adjusted operating income to be in the range of $14.14 billion to $14.31 billion.”

“Lastly, in our Pharmacy & Consumer Wellness segment, we now expect full year adjusted operating income of at least $5.95 billion, an increase of approximately $270 million from our prior guidance.”

“In our Health Services segment, we now expect full year adjusted operating income of at least $7.1 billion, a decrease of approximately $240 million from our prior guidance.”

“We continue to project our full year 2025 medical benefit ratio at the low end of our Health Care Benefits adjusted operating income guidance range to be approximately 91%.”

“In our Health Care Benefits segment, we now expect full year adjusted operating income of approximately $2.72 billion at the low end of our guidance range, an increase of approximately $300 million reflecting our performance in the third quarter and improved expectations for the remainder of the year.”

“We now expect full year total revenues of at least $397 billion, an increase of nearly $6 billion driven by increases across all segments.”

“we remain confident that our thoughtful approach to our geographic footprint, benefit design and pricing positions us well for another year of recovery.”

“And so we're going to take that momentum. And the early signs in AEP is that we're on track to continue that momentum and keep the business on track to returning to target margin.”

“we currently expect the trajectory to improve relative to our long-term expectation of a 5% decline.”

“And in our Pharmacy & Consumer Wellness segment, we are encouraged by our strong performance this year and expect this momentum to continue into next year.”

“Altogether, we expect the segment to deliver low single-digit adjusted operating income growth next year.”

“In our Caremark business, we expect modestly lower growth as we continue our work to transition our contracts towards drug level pricing over the next few years.”

“In our Health Services segment, we expect improvement in our Health Care Delivery business, primarily driven by Oak Street Health.”

“We also expect a tailwind from our exit of the individual exchange business.”

“Beginning with our Health Care Benefits business, we expect another year of meaningful margin improvement at Aetna.”

“We continue to meaningfully improve our leverage ratio, supported by our strong year-to-date performance and expect to make further improvement next year as we grow enterprise earnings driven by margin recovery in our Aetna business.”

“While incorporating this, as Brian will discuss later, we continue to expect meaningful growth in enterprise earnings next year.”

“Based on the current membership, we expect over 81% of our Medicare Advantage members will be in plans rated 4 stars or higher with over 63% of them in 4.5 star plans, nearly double the industry average.”

“But we're going to stay disciplined in our pricing approach to fully insured.”

“We again increased our full year 2025 adjusted EPS guidance to a range of $6.30 to $6.40, up from our previous range of $6 to $6.20.”

“As I sit here today, I would say HSS earnings distribution as you look at the back half versus the front half. 2H is roughly evenly split between the two quarters from a cadence perspective, probably with a slight tilt towards 4Q from a profit perspective.”

“We started the year with a guide of down 5%. We're now at about down 1.6%”

“We're also revising our expectations for full year cash flow from operations to at least $7.5 billion.”

“Altogether, we now expect full year enterprise adjusted operating income to be in a range of $13.77 billion to $13.94 billion.”

“Finally, in our Pharmacy and Consumer Wellness segment, we now expect full year adjusted operating income of at least $5.68 billion, an increase of approximately $200 million from our prior guidance.”

“The outlook for our Pharmacy Services business within our Health Services segment remains unchanged.”

“In our Health Services segment, we now expect full year adjusted operating income of at least $7.34 billion, a decrease of approximately $200 million from our prior guidance.”

“The high end of our health care benefits guidance reflects a 50 basis point improvement in medical cost trend over the remainder of the year, which is worth approximately $0.10 in enterprise adjusted EPS.”

“We now project our full year 2025 medical benefit ratio at the low end of our Health Care Benefits adjusted operating income guidance range to be approximately 91%.”

“In our Health Care Benefits segment, we now expect full year adjusted operating income of approximately $2.42 billion at the low end of our guidance range.”

“We now expect full year total revenues of at least $391.5 billion, an increase of approximately $9 billion, driven by increases across all segments.”

“We continue to expect our leverage ratio to return to more normalized levels as we maintain disciplined financial policies and make progress on margin recovery in the Aetna business.”

“We're having a strong start to the 2026 selling season with retention expected to be in the high 90s.”

“We also recently announced that over the next decade, we committed $20 billion to support our transformation of health care.”

“As we said prior, over time, we expect that the reimbursement erosion, which was one of the primary headwinds that we faced in the retail pharmacy business will equal the cost of goods improvement to drive a more sustainable and durable marketplace.”

“And really, I see the entire Medicare business coming together and continuing the momentum through the back half of the year. And into 2026, as we think about returning that business to target margin.”

“We expect to make progress on margin recovery in our group MA book over the next few years as contracts come due for renewal, including the opportunity to reprice approximately half of our group MA revenue in 2026.”

“We're making good progress on the next stage of evolving the pharmacy reimbursement model as we transition our government business to cost-based pricing models for 2026.”

“So I would say, from a guide perspective, taking a cautious stance on the consumer dynamics and spending piece and then we'll continue to watch immunizations as they remain dynamic and think about the potential for lower market demand in that business.”

“We continue to remain cautious on the outlook for Part D until we have additional experience given the substantial changes in planned liability in 2025.”

“The first answer on the Wegovy announcement is it is not impacting our guidance and it's not factored in, so this will be obviously savings that we will deliver for our customers.”

“We're working very hard for 1/1/26 to move the rest of our scripts into this model and we'll provide more updates on the outcomes of this.”

“The first is the front store, in which we currently source the vast majority of our front store items in American-based companies today, so we do not see a significant impact as it relates to tariffs.”

“First, there was about $100 million of expense favorability, which is primarily timing and will come back over the remainder of the year.”

“Specifically as we sit here today, consensus expectations for the second quarter are notably higher than our own expectations.”

“As you think about the cadence of earnings for the remainder of the year, we now expect approximately 60% of full year consolidated earnings to occur in the first half of the year.”

“Additionally, we now expect our interest expense to be approximately $3.15 billion and our adjusted effective tax rate to be approximately 25.9%.”

“Based on these changes, we are also updating our expectation for full year cash flow from operations to approximately $7 billion.”

“In aggregate, we expect our consolidated adjusted operating income to be in a range of $13.31 billion to $13.65 billion.”

“We continue to expect our Medicare Advantage membership to end the year consistent with our previously guided range of down 5% to 10% year-over-year.”

“We expect to end the year with approximately 26.4 million members, up approximately 600,000 members from our previous guidance, primarily driven by higher membership in our individual exchange and Medicare businesses.”

“We project our full year 2025 medical benefit ratio at the low end of our benefits adjusted operating income guidance range to be approximately 91.3%.”

“We now expect total revenue of $382.6 billion, down approximately $3.3 billion, largely due to our exit from the ACO REACH program and the sale of our MSSP business.”

“We continue to expect our leverage ratio to return to more normalized levels as we maintain our disciplined financial policies and make progress on margin recovery in the Aetna business.”

“We are currently projecting that variable losses in this business will be between $350 million and $400 million for the full year 2025.”

“Our goal is to launch additional bundles later this year and to expand the program more broadly to other conditions such as musculoskeletal and select cardiology services.”

“In addition, we increased our full year 2025 adjusted EPS guidance to a range of $6 to $6.20, up from our previous range of $5.75 to $6.”

“Michael, maybe just one thing to add as we look in the back half of the year, obviously PCW is running as well as we would expect, with the caution to watch out, is the vaccines and immunizations as we anticipate volume impacts, depending on the government actions for end of this year.”

“We are getting after the clinical opportunities aggressively and we're also going to be introducing some rate actions as well, so we think that will mitigate some of the pressure.”

“I feel good that we will make margin improvement in that business that’s embedded in the guidance. It will not get back to breakeven this year, and it’s something that we continue to watch very closely, particularly given the high levels of trend that we experienced and accelerating levels of trend that we experienced in that book into the tailwind of 2024.”

“During the quarter, we made additional progress on rate updates, and with over 40% of our book having re-priced in early January 2025, we have line of sight to a mid-4% [indiscernible] rate increase.”

“Our deliberate approach to our 2025 Medicare Advantage business combined with our improved star ratings will improve margins this year and are part of our ongoing commitment to restore this business to target margins of 3% to 5%.”

“we’re trending toward delivering more than $100 million of annualized purchasing improvement across all of our generics to the PBM and payor customers under CVS CostVantage contracts, and as we continue to improve cost of goods, we pass that through CostVantage to our customers.”

“Your question as it relates to Medicare and Medicaid, we’re actually working for 1/1/26 to move the rest of our book onto a CostVantage-like model.”

“You could see eight points of swing between the first and the fourth quarter as you think about the progression of earnings and the progression of MBRs there, and that’s on the total of Aetna.”

“As you think about the cadence of earnings in 2025, we expect earnings to be more weighted to the first half than the second half, likely at 55/45 split.”

“Over the 2024 and 2025 calendar years, we expect that our business will generate operating cash flows of $15.6 billion, which when combined with improving operating performance will help put us back on the path to our target leverage levels.”

“Finally, we expect cash flow from operations to be approximately $6.5 billion.”

“We also expect our share count to increase modestly to approximately 1.271 billion shares, and we are not contemplating any share repurchases in 2025.”

“We project our tax rate to be approximately 25.5%.”

“We expect interest expense to increase approximately $300 million as we annualize the expense associated with our debt offerings in May and December of 2024.”

“We expect adjusted operating income to decline approximately 5%, in line with our long term guidance framework, to $5.48 billion.”

“Now for our pharmacy and consumer wellness segment, we project script growth of approximately 3.5% and revenue of approximately $134 billion.”

“This initial guidance is consistent with the preview we presented last quarter, where we noted that our initial outlook for this segment would be below our long term growth framework, but we prudently reflect opportunities for upside over the course of the year.”

“Adjusted operating income for this segment is expected to grow approximately 4% to $7.54 billion.”

“Shifting now to our health services segment, we expect revenue of approximately $185 billion primarily driven by growth at Caremark as we continue to deliver value to our clients.”

“Overall, we expect healthcare benefits to deliver adjusted operating income of at least $1.5 billion.”

“We also expect the contribution from net investment income will decline.”

“We also project year-over-year improvements in our combined commercial line business driven by margin recovery in individual exchange offset by pressures in group commercial from membership declines and elevated levels of medical cost trend.”

“At the low end of our healthcare benefits adjusted operating income guidance range, we project our medical benefit ratio will improve by 100 basis points over 2024, yielding an MBR of approximately 91.5%.”

“We expect to generate healthcare benefits revenue of approximately $132 billion as membership declines in Medicare Advantage and individual exchange are offset by Medicare programming changes and growth in other products.”

“Based on our work to date, we were successful in identifying actions that, at a minimum, will offset the return of certain variable expenses in 2025 as we work to drive further efficiencies across the enterprise over the coming years.”

“We continue to take a cautious outlook on medical cost trends in this book and, combined with lower membership, we expect lower contributions from this business in 2025.”

“Our initial expectations reflect meaningful recovery in our Aetna business, particularly in Medicare Advantage, as well as continued growth in health services.”

“As we have discussed previously, 2025 is a transition year for CVS CostVantage and we believe the implementation of this model positions us to bend the trajectory of the PCW business over time.”

“We expect healthcare delivery performance to improve starting in 2026 as the current medical cost trends experienced across the industry are more appropriately reflected in rates and plan bids and our continued investments in this business mature.”

“We are committed to prudent financial policies, including maintenance of our current dividend, as we work to maintain and improve our investment-grade rating, and expect our leverage to return to more normalized levels as we continue to execute on margin recovery in the Aetna business.”

“We’re cautiously optimistic that there might be opportunity there on the backside, but our current outlook doesn’t assume that we get that same level of rate increase when we see the next bolus - I think we’ve got about another 40% that renews around the third quarter, and so our presumption in our forward outlook is that the rate increases there will not be as robust.”

“We estimate that membership in our individual exchange block could contract by over 800,000 lives, and we’ll have greater visibility when all effectuated members have paid their premiums by the end of March.”

“We are cautiously optimistic that our benefit design changes in 2025 will help alleviate some of this supplemental benefit pressure.”

“we remain confident in our ability to deliver on the health services segment earnings outlook we shared with investors on our second quarter call.”

“We expect to have our commercial book, 100% of our commercial book signed by the end of this year.”

“the vast majority of that $1.1 billion will come back in the fourth quarter.”

“As you think about our strategy for both MA and PDP, we are going to shrink membership in PDP.”

“we don’t anticipate that we would need a PDR in that individual business.”

“We have taken, as I believe we’ve previously discussed, double-digit rate increases across this book for next year, and as a deliberate consequence of that rate action, we expect we could shrink that book by as much as 20 to 25% next year”

“We expect that those changes are going to drive margin expansion”

“The first is improvement in stars, and so because of the contracts that we have that are now going to be four stars or better for 2025 payment year, that’s going to be about an $800 million headwind, no matter what the baseline is--or excuse me, tailwind - I keep doing that. It used to be a headwind, and now it’s going to be a tailwind next year.”

“Our early indicators would suggest that we would be down in that size of 10% range on the total book.”

“we have executed the first step of our multi-year cost savings initiative that we expect will generate over $500 million next year, helping to offset the return of variable expense in 2025.”

“We expect our initial outlook for this segment will be below our long term growth framework but will prudently provide opportunities for upside over the course of the year.”

“We continue to view the dislocation between acuity and rates in Medicaid as temporary and expect this to be resolved over subsequent pricing cycles; however, we do not expect the dislocation to be fully resolved before the end of 2025.”

“we expect improvement in contributions from our healthcare benefits segment.”

“As we previously discussed, we expect a return of certain variable corporate expenses. We also expect higher interest as we annualize the expense from our May 2024 financing, a decline in net investment income, and modest dilution from the increase in our share count.”

“We remain committed to maintaining our current investment-grade ratings and expect our leverage to return to more normalized levels as we execute on margin recovery in the Aetna business.”

“This will result in lower commercial risk membership in 2025, hindering our ability to grow earnings in this business.”

“We are making the necessary changes to return our business to profitable growth in 2025.”

“The ongoing discussions with our large PBM partners remain active and constructive as we move forward with the full commercial contract implementation on January of 2025.”

“By the end of November, we will have completed our previously announced three-year store optimization initiative targeting 900 stores and expect to close approximately 270 stores in 2025.”

“We expect the elevated levels of utilization will continue to pressure our 2024 performance”

“our goal would be to increase margins again in 2026 in that business.”

“This is a significant first step on our journey back to target margins of 3% to 5%.”

“We think that there could be some nice tailwinds in that business next year as we think about some of the changes that competitors and ourselves have made as we continue to grow our share of Aetna members inside those clinics.”

“It is possible that our healthcare benefits business could show operating losses in 2024 after generating over $5.5 billion of adjusted operating income in 2023.”

“We could experience mid-single digit percentage losses in our Medicare business. Our foray into the individual exchange business could result in negative margins that approach double digits.”

“We also remain cautious in our outlook for front store sales, which have been pressured in recent quarters, consistent with the broader macroeconomic backdrop.”

“Additionally in this scenario, we would likely need to take a PDR on our group Medicare Advantage business related to 2025 dates of service, which would further pressure 2024 results.”

“If trends develop unfavorably and persist at the significant levels we have experience in recent months, our fourth quarter reported NBR could increase by over 700 basis points as compared to the fourth quarter of 2023.”

“Yes, nothing has changed relative to our Stars. It actually improved given some of the changes that occurred earlier this quarter, and Kevin, you described what we feel is very positive momentum going into 2025.”

“Our intention is to move all of our commercial contracts, as I stated previously, to our CostVantage model.”

“I feel like we have a high degree of confidence that we caught the trend for 2025 bids.”

“As a result of this update, we now expect margins for our individual exchange business to be below breakeven this year; however, we are confident that our 2025 submitted rate filings, which we further enhanced following the 2023 risk adjustment update, will place us back on our multi-year margin trajectory.”

“We are on track to achieve our three-year goal of closing 900 stores by the end of this year, with 851 stores closed to date.”

“What CVS CostVantage will do is over time, it will flatten that out to basically allow payors to have the benefits of our industry-leading cost of goods to get passed through in a more transparent fashion, and flatten out the reimbursement pressures over time.”

“But we’re experiencing all-in, including pharmacy, double-digit trends this year, and when you look at the core trends associated with the baseline in the bids and the baseline that we carried into 2025, it’s consistent with the experience that we are seeing year to date, that we’ve carried through for the next 18 months.”

“I think when we were out earlier last quarter, we talked about a range of 5% to 10%. That’s a good baseline”

“We believe that we have the opportunity to drive $2 billion worth of cost savings over time.”

“In 2025, we expect savings from this initiative to drive at least $500 million of adjusted operating earnings.”

“In Medicaid, we believe the dislocation between acuity and rates is temporary and will be largely resolved through the next pricing cycle.”

“As a result, we continue to expect profit improvement in that business in 2025.”

“The Part D receivable increase will be repaid by CMS during the fourth quarter of 2025.”

“Finally, we updated our expectation for cash flow from operations to approximately $9 billion in 2024.”

“In our pharmacy and consumer wellness segment, we now project adjusted operating income to increase by $100 million to $150 million, or to $5.7 billion to $5.75 billion.”

“There is no change to the outlook for our healthcare delivery assets as these businesses continue to perform in line with our expectations.”

“In our health services segment, we are increasing our estimates for 2024 adjusted operating income by a range of $200 million to $250 million, or $7.2 billion to $7.25 billion.”

“We expect HCB’s full year medical benefit ratio to be in a range of 90.6% to 90.8%, an increase of 80 to 100 basis points versus our prior guidance.”

“Medical cost trends in our commercial business remain elevated but are broadly in line with our expectations and pricing.”

“We expect this number to further expand as we introduce co-branded Aetna and Oak Street plans in the 2025 annual enrolment period.”

“In our commercial business, we expect membership growth in 2025 driven by new business wins and strong retention, both of which are running ahead of where we were at this time last year.”

“The actions we took are expected to drive 100 to 200 basis points of margin recovery in 2025 off of our current baseline and start the multi-year pathway to achieving target margins of 4% to 5%.”

“Discussions with our large CVM partners are active and constructive as we move forward with full implementation for our commercial contracts on January 1, 2025.”

“We are also updating our full year 2024 adjusted EPS guidance to a range of $6.40 to $6.55, based on the continued pressure in our healthcare benefits business offset by strong performance in health services and the pharmacy and consumer wellness business.”

“so I would say more to come in the next couple quarters, but we remain positive about where we stand at this point with CVS CostVantage and how it’s resonating in the marketplace.”

“It is worth noting that if trends persist at elevated levels, we may be required to take an in-year 2024 premium deficiency reserve in our Medicare business.”

“As a result, our updated guidance range now reflects the trends in the second half of 2024 could be higher than levels seen in the first half.”

“We believe this dislocation will self-correct over time as we continue to work closely with our state partners to ensure the underlying trends are reflected in our rates, but we have not assumed material improvement in our 2024 outlook.”

“And if I just think about stepping back from your question, Nate, revenue in that product per member is clearly going to go up.”

“So obviously, we have a very significant high trend that we are absolutely going to incorporate into our pricing. And so the trends that Tom talked about for 2024, we will reflect again in 2025.”

“We will take material pricing and benefit design actions for 2025, and the impact of those changes will depend on how cost trends develop in both 2024 and 2025 and how the market responds to those trends.”

“We'll see how we're able to recoup that over the remainder of the year. But at this point, what we've assumed is that, that first quarter is permanent and that we can get back to our previous projections for the remainder of the year.”

“But we're going to be very thoughtful about how we think about our membership footprint. And again, the ultimate goal is membership stability, but we're going to favor margin over membership for next year.”

“We began a comprehensive review of that last year, we took actions, they're showing up this year and now we're going to accelerate other initiatives over the next few months.”

“And so we're going to continue those trends into 2025.”

“There is a very substantial change in plan liability there, which will result in much higher premiums, which we think is going to impact both overall benefits within the bids.”

“To the extent that we don't believe we can credibly recapture margin in a reasonable period of time, we will exit those counties.”

“On the D-SNP product, our intention is to reduce our supplemental benefits in certain areas, including some of the kind of FlexCards that we put in the market this year.”

“So as you think about Medicare Advantage, as I said, it's a $65 billion to $70 billion revenue portfolio today. And our goal for next year is that we would get about 200 basis points of margin improvement in that business or up to that amount.”

“So accordingly, as we look at the seasonality of earnings, we think -- we currently expect that you'll see probably more like 55% to 60% of our earnings in the second half of 2024 to adjust for some of that sloping.”

“Finally, our framework contemplates a stable share count in 2025.”

“Within Health Care Benefits, our Medicare Advantage business is projected to generate between $65 billion and $70 billion in revenues in 2024, but will experience significant losses.”

“We do not expect to repurchase any additional shares for the remainder of 2024.”

“Finally, we updated our expectation for cash flow from operations to at least $10.5 billion in 2024.”

“We now expect 2024 share count to be approximately 1.265 billion shares and our adjusted tax rate to be approximately 25.6%.”

“This outlook incorporates a cautious stance on consumer activity over the remainder of the year due to slowing front store activity in the first quarter.”

“Our expectations for the Pharmacy & Consumer Wellness segment remain the same with adjusted operating income of at least $5.6 billion.”

“The remaining approximately $400 million of medical cost pressure in the first quarter is driven by elevated utilization trend that our guidance now assumes will persist for the remainder of 2024.”

“We have also raised our expectations for RSV-related costs in the second half based on our experience in the first quarter.”

“We are engaged in active discussion with PBMs to roll out CVS CostVantage for commercial contracts on January 1, 2025.”

“The combination of our internal efforts and the multiyear repricing opportunity gives us confidence in our ability to return to our target margin of 4% to 5% in 3 to 4 years.”

“Improved Star Ratings in 2025 could represent a $700 million tailwind depending on membership retention levels, but also reduces our ability to adjust certain benefits.”

“Our stars recovery in 2025 will enhance our earnings trajectory, even as we work to adjust our plans or count for the preliminary 2025 Medicare Advantage wait notice, which does not adequately cover recent medical cost runs.”

“we are committed to achieving our targeted 4% to 5% margin in Medicare Advantage over time and we will begin that journey in 2025.”

“We continue to expect to add 50 to 60 centers in 2024.”

“That being said, we do intend to take additional margin actions. Our goal is to do so in excess of our Stars tailwind that we have.”

“We expect to update investors later this year on our progress against this goal.”

“For 2025 our goal is to deliver low-double-digit adjusted EPS growth of our updated 2024 guidance.”

“As a result, Healthcare Benefits 2024 MBR will see the largest year-over-year increase in the first quarter and the smallest in the fourth quarter.”

“we expect to generate roughly 20% of full-year adjusted EPS in the first quarter.”

“we expect to generate less than 50% of our adjusted EPS in the first-half.”

“We continue to expect these new members will be neutral to earnings”

“we are prudently assuming that the elevated medical cost trends we observed in the fourth quarter will carry forward into 2024.”

“we expect to add at least 800,000 new members in 2024.”

“As we think about 2024, given the newness of some of these vaccines, what we've tried to do is take a little bit more cautious outlook as we thought about what the pull-through might be for that outperformance in the fourth quarter.”

“we are taking a cautious stance on our outlook for Medicare Advantage utilization until we have further clarity of these industry-wide trends.”

“as we think about Cordavis in 2024, we absolutely believe that there will be a benefit as we drive volume through that organization.”

“By the end of the year, we'll have wage investments of over $1 billion.”

“we are going to launch it at a list price that's greater than 80% lower than the current list price for Humira.”

“feel very good about our ability to achieve at or above-market growth on the Medicare side.”

“this business is now poised to reach an annualized run rate of more than $6 billion of revenue, and we are well positioned to earn a positive margin in this business in 2024 based on specific actions our teams are implementing including pricing adjustments.”

“Our ability to offer access to convenient sites of care and the integrated benefits that seniors value most will position us to grow at or above the market in 2024.”

“Our 2024 Star ratings will improve our position in the '25 plan year and will enhance our position well into the future.”

“Our 2024 rating show that we will have 87% of our Medicare Advantage members and plans rated 4 stars or better.”

“We are reconfirming our guidance range for 2023 adjusted EPS of $8.50 to $8.70”

“I think you're probably looking at a low-single digit growth as you think about the AOI there.”

“I think that as you think about core growth, I think that's probably the best way to start to think about this. So we do think that you should see mid-single-digit core growth out of the business.”

“as you think about next year, we've anticipated that the current level of performance is not going to persist partially because of COVID, partially because of the typical dynamics of just rate and reimbursement pressure but also about a little bit of a provision for consumer softness.”

“We project that vaccines are probably going to peak early in the fourth quarter before declining in 2024, and that's primarily due to COVID softening versus part of the early part of '23 when the public health emergency was still in effect.”

“we actually think that, that gap will shrink over time even as V28 is more fully implemented.”

“it is only a third phased in next year, but we think we'll probably have about a 2% revenue impact.”

“we believe that for 2023, we've appropriately priced that and we -- we're taking our latest thinking into our pricing for '24.”

“as we look out into 2024 with Cordavis, we intend to have a full portfolio of products as we see other biosimilar competition coming in the specialty marketplace to facilitate the broader access with these products in the U.S.”

“Our expectation for 2025 is that we'll take significant ground against our margin targets.”

“actually, we expect marginal profit contribution on new members for D-SNP, and so, actually view that as a positive.”

“we expect to achieve the high end of our enterprise cost reduction initiatives, which we previously talked about being $700 million to $800 million next year.”

“a portion of these tailwinds are expected to persist into 2024.”

“we presume that the elevated level of trend we observed in the third quarter persist into the fourth quarter, net of some revenue offsets that represents about $550 million of pressure in Medicare.”

“We believe we have the opportunity to capture value from our newly created for Cordavis business.”

“We now expect the savings from our previously announced actions and cost initiatives coming at the higher end of our guidance.”

“We expect underlying growth in our core businesses.”

“We expect a lower contribution in our PCW segment related to COVID, consumer softness and incremental labor investments, and we expect the 340B headwind from 2023 to annualize in 2024.”

“contributions from Centene will decline as the contract ends on January 1, 2024.”

“We now expect the impact to be closer to the low end of our previously communicated range of $800 million to $1 billion.”

“We are also updating our adjusted effective tax rate to 24.9% and our share count to 1.291 billion.”

“Our expectation for capital expenditures is now $2.5 billion to $2.7 billion.”

“we now anticipate full year 2023 cash flow from operations to be at the upper end of our range of $12.5 billion to $13.5 billion.”

“we now expect adjusted operating income in a range of $5.76 billion to $5.86 billion, primarily driven by higher contributions from seasonal immunizations, partially offset by lower-than-expected script volume, primarily attributable to Medicaid redeterminations.”

“we are updating our adjusted operating income guidance to a range of $7.18 billion to $7.31 billion, reflecting the strong execution year-to-date in our Pharmacy Services business, and our expectation of continued strength for the remainder of the year.”

“we now expect adjusted operating income for the segment to be in a range of $5.63 billion to $5.76 billion.”

“we are on track to open a total of 35 new centers this year, ramping to 50 to 60 centers in 2024.”

“These members, particularly when added late in the year, will drive a higher MBR.”

“Cash flows benefited from the timing of CMS payments that are expected to normalize in the fourth quarter.”

“we do expect to have a meaningful contribution of earnings improvement from these two assets from their base in 2023 into 2024, and everything we’ve seen in our first quarter of ownership, I think has been consistent with that, and I think we’re even more--have stronger conviction about the value that we can bring, so they will be a positive contributor in our estimation of earnings growth in 2024.”

“we have a high degree of visibility into getting the effect that we committed to for 2024.”

“We have more conviction now that the meaningful value that we thought we could unlock will surface over the course of the next couple years.”

“Given the level of uncertainty for 2024, we also believe investors should no longer rely on our 2025 adjusted EPS target of $10.”

“When combining all of our productivity initiatives, we are confident we will achieve the $700 million to $800 million of cost savings that we are targeting in 2024.”

“We are reaffirming our full year 2023 adjusted EPS guidance range of $8.50 to $8.70.”

“in PCW, we’ve made some provision for the softening consumer demand to persist into next year, as well as potentially more decline in COVID for next year - we have factored that into our guidance”

“The positive item, obviously, is we do expect some of the outperformance in pharmacy services that we’re experiencing in 2023 will pull through favorably into our 2024 performance.”

“our updated outlook for 2024 includes the full impact of this accelerated expansion without the benefit of any structured transaction.”

“that would be our plan for 2024 and beyond, that that would begin to be a profit contributor for us, so I do think it’s one of the growth levers that we have.”

“As a result of Centene, our health plan business will be down year-over-year as we continue to focus on pricing discipline for both prospective customers and renewing our in-force customers.”

“our revised 2024 guidance assumes that we have an incremental headwind in 2024 over our revised 2023 guidance baseline.”

“we think it’s appropriate to be cautious in our outlook and have assumed that the 100 basis points of pressure observed in the first half of ’23 persists through the second half of the year.”

“We continue to maintain our projections for interest expense and share count, and finally we now project our adjusted effective tax rate at 25.3%.”

“We continue to anticipate strong full year 2023 cash flow from operations in a range of $12.5 billion to $13.5 billion.”

“While there is uncertainty surrounding the duration of this utilization spike, our 2023 guidance now prudently assumes that these medical cost trends will remain elevated for the rest of 2023.”

“These cash flows were impacted by the timing of CMS payments that are expected to normalize in the fourth quarter.”

“These efforts are expected to generate over $600 million of run rate savings beginning in 2024.”

“We now expect to build 50 to 60 clinics next year.”

“By the end of 2023, we expect to have Oak Street clinics in 25 states, up from 21 at the close of the transaction.”

“We expect to continue to return cash to our shareholders and deploy capital to enhance shareholder value.”

“To the extent utilization does abate and costs develop more favorably in 2023 than we project, that could serve as upside to our outlook for both 2023 and 2024.”

“If a higher level of medical cost trend then persists again in ’24 or, said differently, if we don’t see an abatement in medical cost trend, we would then be pressured on our bid assumptions.”

“We remain committed to achieving the $9 and $10 targets for 2024 and 2025 that we shared during our earnings call in February.”

“We remain on track to close 300 stores in 2023 and a cumulative total of 900 stores by 2024.”

“First of all, as I said in my prepared remarks, we do plan to get back to market growth in our individual MA product for a number of reasons.”

“Due to the strength of our results in the first quarter, the incorporation of Signify and Oak Street and the 340B headwind, we now expect second half 2023 earnings to be slightly more than 50% of the full year results with the third quarter modestly higher than the fourth quarter.”

“Capital expenditures are unchanged at a range of $2.8 billion to $3 billion, and we continue to project an adjusted effective tax rate of 25.5%.”

“We continue to anticipate strong cash flow from operations in 2023 and are maintaining our guidance range of $12.5 billion to $13.5 billion.”

“Finally, our new projection for interest expense is $2.7 billion, reflecting the incremental financing costs for Signify and Oak Street.”

“We do not expect these higher corporate cash balances to persist in 2023 following the recent closure of both the Signify and Oak Street acquisitions.”

“Cash flows in the quarter benefited from the timing of CMS payments that are expected to normalize by the end of the year.”

“The early close of the acquisition will be a short-term headwind to our 2023 adjusted EPS, but will enable us to unlock synergies earlier and evaluate all options to accelerate growth at Oak Street and CVS Health.”

“In our Medicaid business, we increase membership in the quarter but expect declines for the rest of the year on the expiration of the public health emergency.”

“The recent award of two additional Marquee Group Medicare Advantage contracts serving approximately 45,000 retirees and their eligible dependents will supplement that growth beginning in January of 2024.”

“We now expect approximately 12% membership growth in our Medicare Advantage business for the full year 2023 and are diligently working to improve our competitive position in individual MA to return to market growth in 2024.”

“We believe both areas represent sizable opportunities that have the potential to serve as mitigating tailwinds for 2024 and 2025.”

“Recently, there have been significant developments in the 340B program that create challenges for our Pharmacy Benefits business. And based on our most recent experience, COVID contributions may dissipate more rapidly than previously anticipated.”

“We’re committed to improve our Stars ratings. We believe we are the right actions and the right team to really improve the ratings overall.”

“In our forecasting, the general – I would tell you the general targeting as we continue to expect retail to be able to maintain flat.”

“We are targeting producing the $6 billion again despite kind of that headwind.”

“I mean first on the Medicare front, a couple of bright spots during AEP, where our growth in the duals population as well as our group MA products, and so we expect continued growth in those products through the remainder of the year.”

“And we still feel the pricing environment is very sound and rational going into 2023.”

“We announced last month that we closed the state of North Carolina, which will bring us about 570,000 members on 1/1/25.”

“We do expect to have this transaction close, I’ll let Shawn comment on the financials, but I don’t think that we have material changes in those numbers.”

“Our current projections assume modest discretionary repurchase activity in 2024.”

“We expect revenue growth of 1% to 3% and prescription growth of 2% to 4% despite continuing decreases of COVID-19 vaccines.”

“Overall, we expect these results to generate adjusted operating income growth of 4% to 5%.”

“For the full year 2023, we expect pharmacy claims to range from flat to growth of 1%.”

“Moving to our Pharmacy Services segment. We expect revenue in a range from 1% to 2% growth, driven by a successful 2023 selling season and strong retention, partially offset by lower Medicaid volume.”

“Overall, we expect to generate revenue growth of 11% to 13%.”

“With 169 medical centers across 21 states today, we see a significant opportunity to expand in the next 2 years and provide superior care to many more patients.”

“We anticipate a positive, sustainable contribution from this membership in future years.”

“We now expect to end 2023 with between 900,000 and 1 million individual members.”

“The way we see that playing out is, I think this would be roughly EPS-neutral probably in like year four of our ownership, thereabouts, and begin to be accretive on an EPS line for year five.”

“From a return on capital standpoint, we think it earns double-digit returns on capital in year seven.”

“When you look at this asset in concert with Signify, we project this could improve our overall long-term earnings company growth rate by at least 100 basis points a year as these investments mature.”

“We project that our investment in Oak Street will drive double-digit returns on invested capital over time as clinics mature and synergies are realized.”

“We envisioned five main opportunities to realize more than $500 million of value over time”

“At their current rate of expansion, we expect Oak Street to have over 300 clinics by 2026, at which point we project they will have more than $2 billion of embedded Oak Street adjusted EBITDA.”

“These two factors combine to drive clinics to maturity, achieving profitability within the first 3 years and unlocking annual adjusted EBITDA potential of approximately $7 million per clinic using Oak Street’s definition of adjusted EBITDA.”

“I would say that we would have probably between $4 billion and $8 billion of flexibility over the ‘23, ‘24 window and then that grows more to like the $10 billion to $15 billion of flexibility in the ‘24, ‘25 window.”

“As leverage begins to subside in 2025, we will have potential for additional repurchases.”

“I am confident that we have the activities, the investment and approach to mitigate stars for 2024.”

“No, we would actually use some of our balance sheet capacity. We're well below sort of our leverage metrics now, and we'll continue to do that.”

“I think this year is a good demonstration that there's an endemic tail to this business going forward. And so we are expecting some contribution likely not as high as we thought coming into this year.”

“But you're talking about probably removing $900 million of operating income on COVID-related categories in retail”

“That would leave a headwind of about $1 billion or $0.55 a share for 2024.”

“We project the combined impact of [stars] (ph) and Centene on 2024 to be approximately $2 billion on an unmitigated basis.”

“But our sort of baseline assumption that is behind my commentary today is a similar level of cash flow that we're talking about for this year in the same neighborhood.”

“I think in the broad strokes of the year, it's going to be a similar year. Obviously, I think we think CapEx will be in a comparable position and obviously, regulatory capital is a byproduct of the growth in the business, and we'll look at that as well.”

“The recently announced loss of the Centene contract places further pressure on our 2024 outlook.”

“The change in star ratings is not projected to impact our 2022 guidance, and we expect to be able to manage the impacts to 2023, including cost to improve our 2024 star ratings.”

“Capital deployment remains an important part of our growth equation, and we expect to repurchase shares in 2023 opportunistically to ensure we achieve our targets and to offset dilution.”

“In Health Care Benefits, we will continue to target mid- to high single-digit growth.”

“In PSS, we are targeting mid-single-digit growth over our baseline.”

“I think if successful on Omnicare, there's probably another $0.02 or $0.03 potentially that I would add to that $0.04 that I described in the bridge for divested asset.”

“My comments today regarding repurchases and achieving our Investor Day commitments, assume that we're successful in mitigating approximately half of this headwind.”