CVS Health executives offered a defense of pharmacy benefit managers on Wednesday as discussions about reforming the industry heat up on the Hill.
CVS owns the country's largest PBM, Caremark, which is one of three companies that dominate that market alongside Cigna's Express Scripts and UnitedHealth's OptumRx. The top brass at all three PBMs will go before the Senate next week in a critical hearing on drug pricing.
CEO Karen Lynch said during the company's Q1 earnings call that PBMs "play an essential role" in addressing drug prices.
"I think we all would agree that in fact, the PBM is the only player in the supply chain whose specific role it is to lower drug costs for our customers," she said.
The Senate Health, Education, Labor and Pensions Committee reached a deal on potential legislation to reform PBMs, though the process hit a snag this week during a markup amid procedural objections from Republicans on the panel.
Lynch said that Caremark passes 98% of rebates through to the consumer, and puts a focus on transparency. The opaque nature of the pharmaceutical pricing ecosystem has drawn ire from policymakers, and PBMs and Big Pharma point the finger at each other as the main culprit in driving up drug costs.
"We've answered the government's questions on transparency and innovation and our clients are making those choices," Lynch said. "And I think that we have consistently demonstrated that the PBMs play a critical role in the health care ecosystem."
Just one day after closing its massive $10.6 billion Oak Street Health buy, healthcare giant CVS released its first-quarter financial results, where it posted $2.1 billion in profit.
That's down from the $2.4 billion it reported in the prior year quarter, according to its earnings report (PDF). Revenues were up, however, growing 11% from $76.8 billion in the first quarter of 2022 to $85.3 billion in the first quarter of 2023.
The company beat the Street on both figures, according to analysts at Zacks Investment Research.
“We delivered another strong quarter while executing on the strategy we outlined in December 2021, leading to the close of the Signify Health acquisition followed quickly by Oak Street Health," CEO Karen Lynch said in the release. "These additions are core to our strategy and will help unlock future growth as we push further into value-based care, which prioritizes keeping people healthy.”
The $7.8 billion acquisition of Signify closed in late March. With these deals on the way to finalization in early part of the year, the company launched a health services segment that aligns its pharmacy benefit management arm, Caremark, with its healthcare services and provider enablement offerings.
Revenues at that segment were $44.6 billion, up 12.6% compared to the prior year quarter. Revenues at its health benefit arm, Aetna, were also up by about 12%, reaching $25.9 billion.
In its retail pharmacy and wellness business, revenues grew by 7.8% year over year to reach $27.9 billion, CVS said in the report.
Despite the earnings and revenue beat, CVS lowered its guidance for the year from between $8.70 and $8.90 in earnings per share to between $8.50 and $8.70 in earnings per share.