- CVS Health reported its first earnings since closing its merger with health insurer Aetna.
- The pharmacy giant said its profit this year will be a lot lower than Wall Street expected, sending its stock plunging.
- In a call with analysts, CVS mentioned “headwinds” 10 times. Among the challenges CVS is facing: drug-pricing scrutiny and a deteriorating long-term-care pharmacy business.
- CVS Health Chief Executive Officer Larry Merlo said the company has a strategy to confront the challenges, and called 2019 “a bridge to the future.”
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CVS Health is making a big bet that it can reshape the way the health industry works, but getting there isn’t necessarily going to be smooth.
At the end of 2018, CVS closed its $70 billion merger with Aetna. The merger combines a chain of nearly 10,000 pharmacies that also owns a drug benefits business with one of the biggest US health insurers. The result is an entirely new healthcare company that can wield a tremendous amount of power over how healthcare gets paid for and provided to patients.
On Wednesday, CVS reported its first quarterly earnings since the merger closed. Throughout the course of its call with investors, CVS mentioned a key word 10 times: “headwinds.”
Blaming those headwinds, CVS told investors that its expected 2019 earnings will be in a range of $6.68 to $6.88 a share. That was far less than analysts’ expectations, sending CVS shares down 7% on Wednesday.
During the call, CVS executives detailed the multiple headwinds the business is facing around the company’s pharmacy business and the company’s long-term care business, called Omnicare.
In particular, CVS Chief Executive Officer Larry Merlo noted that in 2019, CVS is expecting less of a benefit from new generics driving the prices of medications down, and lower inflation on brand-name drugs. That is, drugmakers aren’t raising the prices of their drugs as much as they have in the…