Results Center

For the three months ended June 30, 2024 compared to the prior year:

Total revenues increased 2.6% primarily driven by growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by a decline in the Health Services segment.

Operating income decreased 5.8% primarily due to the decrease in adjusted operating income described below, partially offset by the absence of a $496 million restructuring charge recorded in the prior year as well as a decrease in acquisition-related transaction and integration costs compared to the prior year.

Adjusted operating income decreased 16.4% primarily driven by declines in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by an increase in the Health Services segment.

Interest expense increased $46 million, or 6.7%, due to higher debt in the three months ended June 30, 2024, primarily driven by long-term debt issued in June of 2023 to fund the Company’s acquisition of Oak Street Health, Inc. (“Oak Street Health”), as well as long-term debt issued in May of 2024.

The effective income tax rate decreased to 24.3% compared to 25.5% primarily due to a state tax settlement during the three months ended June 30, 2024.

The Health Services segment provides a full range of pharmacy benefit management solutions, delivers health care services in its medical clinics, virtually, and in the home, and offers provider enablement solutions.

The segment results for the three months ended June 30, 2024 and 2023 were as follows:

Total revenues decreased 8.8% for the three months ended June 30, 2024 compared to the prior year primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, increased contributions from the Company’s health care delivery assets and growth in specialty pharmacy.

Adjusted operating income increased 1.1% for the three months ended June 30, 2024 compared to the prior year primarily driven by improved purchasing economics, partially offset by continued pharmacy client price improvements and the previously announced loss of a large client.

Pharmacy claims processed decreased 18.3% on a 30-day equivalent basis for the three months ended June 30, 2024 compared to the prior year, reflecting the previously announced loss of a large client.

The Pharmacy & Consumer Wellness segment dispenses prescriptions in its retail pharmacies and through its infusion operations, provides ancillary pharmacy services including pharmacy patient care programs, diagnostic testing and vaccination administration, and sells a wide assortment of health and wellness products and general merchandise. The segment also provides pharmacy services to long-term care facilities and pharmacy fulfillment services to support the Health Services segment’s specialty and mail order pharmacy offerings.

The segment results for the three months ended June 30, 2024 and 2023 were as follows:

Total revenues increased 3.7% for the three months ended June 30, 2024 compared to the prior year primarily driven by increased prescription volume and pharmacy drug mix. These increases were partially offset by continued pharmacy reimbursement pressure, the impact of recent generic introductions and decreased front store volume, including the impact of a decrease in store count and lower contributions from COVID-19 over-the-counter (“OTC”) test kits since the expiration of the public health emergency in May 2023.

Adjusted operating income decreased 12.0% for the three months ended June 30, 2024, compared to the prior year primarily driven by continued pharmacy reimbursement pressure and decreased front store volume, including lower contributions from COVID-19 OTC test kits. These decreases were partially offset by increased prescription volume, improved drug purchasing and pharmacy drug mix.

Prescriptions filled increased 3.6% on a 30-day equivalent basis for the three months ended June 30, 2024 compared to the prior year primarily driven by increased utilization.

The Health Care Benefits segment offers a full range of insured and self-insured (“ASC”) medical, pharmacy, dental and behavioral health products and services.

The segment results for the three and six months ended June 30, 2024 and 2023 were as follows:

Total revenues increased 21.4% for the three months ended June 30, 2024 compared to the prior year driven by growth in the Medicare and Commercial product lines.

Adjusted operating income decreased 39.1% for the three months ended June 30, 2024 compared to the prior year primarily driven by increased utilization and the unfavorable impact of the previously disclosed decline in the Company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, higher acuity in Medicaid primarily attributable to the resumption of redeterminations, as well as a change in estimate related to the individual exchange business risk adjustment accrual for the 2023 plan year recorded in the second quarter of 2024. These decreases were partially offset by a favorable year-over-year impact of prior period development and an increase in net investment income.

The MBR increased to 89.6% in the three months ended June 30, 2024 compared to 86.2% in the prior year driven by increased utilization and the unfavorable impact of the Company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, as well as the higher acuity in Medicaid and the change in estimate related to the individual exchange business risk adjustment accrual described above. These increases were partially offset by the favorable year-over-year impact of prior period development.

Medical membership as of June 30, 2024 of 27.0 million increased 200,000 members compared with March 31, 2024, reflecting increases in the Medicare and Medicaid product lines, including the commencement of the Medicaid Oklahoma contract on April 1, 2024.

Prior years’ health care costs payable estimates developed favorably by $623 million during the six months ended June 30, 2024. This development is reported on a basis consistent with the prior years’ development reported in the health care costs payable table in the Company’s annual audited financial statements and does not directly correspond to an increase in 2024 operating results.

Days claims payable were 43.1 days as of June 30, 2024, a decrease of 1.4 days compared to March 31, 2024. The decrease was primarily driven by elevated reserves held in the first quarter of 2024, including the impact of the Change Healthcare cyberattack.

The Company revised its full-year 2024 GAAP diluted EPS guidance to a range of $4.95 to $5.20 from at least $5.64 and revised its full-year 2024 Adjusted EPS guidance to a range of $6.40 to $6.65 from at least $7.00. The Company also revised its full-year 2024 cash flow from operations guidance to approximately $9.0 billion from at least $10.5 billion.

The Company’s guidance revision reflects continued pressure in the Health Care Benefits segment, partially offset by strong performance in the Health Services and Pharmacy & Consumer Wellness segments.

The adjustments between full-year 2024 GAAP diluted EPS and Adjusted EPS include amortization of intangible assets, net realized capital losses, acquisition-related integration costs, opioid litigation charges and the corresponding income tax benefit or expense related to the items excluded from adjusted income attributable to CVS Health.