CVS 4Q15 Earnings Call Notes

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Larry J. Merlo – President, Chief Executive Officer & Director

Top of mind for our clients is specialty pharma cost

“Now as we’ve been discussing, top of mind for our clients is their rapidly growing specialty costs, and our specialty pharmacy business offers a comprehensive set of programs to help clients effectively manage specialty trend. As a result, we continue to outpace the market and gain share. In the fourth quarter, specialty revenues increased 32% and continued to outpace market growth rates.”

Front of store comps down 0.5%

“In the front store business, comps were down slightly, 0.5% in the quarter, and reflected softer customer traffic partially offset by an increase in basket size”

Med D cost is lower than was expected in 2006 when it was launched

“we’ve got to be careful that private-sector innovation I think has done a lot with which to satisfy the objective, right drug, right patient at the lowest possible cost. And if you look at Med D as an example, it was 2006. It’s almost a decade later now, and when you look at the estimates of what CBO had predicted the cost of that would be 10 years ago, and what it’s costing today, it’s a fraction of that, which I think is one of the key reasons for that is private-sector innovation and the fact that competition ultimately drives down costs.”

David M. Denton – Chief Financial Officer & Executive Vice President

Jonathan C. Roberts – Executive Vice President & President, CVS/caremark

Hep C volume has leveled off, down a bit from last year

“Hey, Dave. This is Jon. So Hep C volume I think has leveled off as we are into 2016, down a little bit from where we were last year. Merck launched their new product, had a list price $54,000, and that is less expensive than the other products on the market like Harvoni. So we’ll evaluate these new products and negotiate the best deal for our clients, and we continually evaluate our formulary selections. And we’ll do the same as these new products come to market.”

Helena B. Foulkes – Executive Vice President, President – CVS/pharmacy

Haven’t seen any change in the consumer from what we saw in 4Q

Yeah, I would just say overall I’d say things are holding fairly steady. We certainly have seen the consumer – I wouldn’t say any change, really, from what we were seeing in the fourth quarter. I think the big thing we’ve been focused on and continue to focus on is being smart about where we invest our margin dollars, so you can see us continue to downplay our circulars and really focus on ExtraCare, which is allowing us to find those high-value customers and make sure they’re coming into our stores.