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The first quarter went better than expected for CVS, as total revenue escalated 11% vs. first quarter 2022 to just over $85 billion.

CVS posts strong Q1, but cuts 2023 forecast

Pharmacy retailer is taking its foot off the gas following major acquisitions

After making a deeper commitment to its healthcare strategy over the last few months, CVS re-planted itself as far as how the rest of the year will go. The pharmacy retailer’s earnings forecast for 2023 has been cut.

The first quarter went better than expected for CVS, as total revenue escalated 11% vs. first quarter 2022 to just over $85 billion. Deals were finalized with primary care provider Oak Street Health and home health care provider Signify Health over the first three months of the year, which had CVS retreating on the 2023 earnings forecast. However, first quarter revenues were strong in the three CVS segments that include healthcare benefits, health services and pharmacy and consumer wellness.

Insurance enrollment at CVS increased by more than 1 million, and the drug store chain also put through more pharmacy claims thanks in part to a hard cough, cold and flu season. As a result of the increase in claims, CVS’s health services sector experienced a 12.5% increase vs. first quarter 2022 that amounted to just over $44.5 billion.

A write-down from its Omnicare long-term business contributed to CVS’s net operating income to slip 3% to $3.45 billion during the first quarter.

CVS has already closed 100 stores this year, and plans on locking a total of 300 in 2023. The goal is to have 900 CVS stores closed by 2024.

CVS has been dealing with problems at the state level. Oklahoma lawmakers recently jumped on the pharmacy about 90-day prescription orders.

CVS Caremark customers have been notified via letter or email citing an Oklahoma law passed in 2019 as the reason the pharmacy can no longer deal with 90-day prescriptions. Lawmakers were so outraged over the news that Democrats and Republicans held a joint press conference to clear the air. Breaking up the length of prescriptions would require more money and more store visits for shoppers.

The law CVS has referred to actually gives people the right to shop around prescriptions to avoid extreme markups on price. The fear was large pharmacies like CVS would form a monopoly. Lawmakers said CVS is spreading misinformation and that the retailer has made a business decision to stop filling 90-day prescriptions.

Oklahoma Insurance Commissioner Glen Mulready said he has been trying to work with CVS since the law was passed, but claimed CVS, based in Woonsocket, R.I., always throwed it back as a technical or contractual issue with employees, and one that can’t be fixed until the next year. The commission is now threatening to suspend or revoke CVS’s license if the behavior continues.

CVS released the following statement:

 “We share the commitment of Commissioner Mulready and Oklahoma lawmakers to protecting Oklahomans’ access to affordable prescription drugs, and we look forward to continued dialogue with the Oklahoma Insurance Department (OID) and our clients to advance that shared goal.

“The OID recently determined that legislation enacted in 2019 is applicable to prescription benefits for certain multistate or national employers headquartered outside the state of Oklahoma. We have discussed with the OID our concerns about the impact changing uniform benefit design could have on consumers who rely on 90-day prescriptions. We continue to discuss this matter with the commissioner and look forward to resolving this situation with OID to avoid any interruption to patient benefits and protect Oklahomans’ access to affordable prescription drugs.”

CVS’s Caremark was fined $500,000 by the Minnesota Department of Commerce earlier this week, accusing the retailer of directing patients to pharmacies or mail-order prescription services that it had financial connections to.

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