CVS Health Corporation

Good morning and welcome to the CVS Health first quarter 2020 earnings conference call. A question and answer session will follow CVS Health's prepared remarks. As a reminder, this call is being recorded. I would now like to turn the call over to Valerie Hartel, Senior Vice President of Investor Relations for CVS Health. Please go ahead.

Thank you and good morning everyone. Welcome to the CVS Health first quarter 2020 earnings call. As a reminder, this call is being recorded. I'm Valerie Hartel, Senior Vice President of Investor Relations for CVS Health. I am joined this morning by Larry Merlot, President and CEO, and Eva Barado, Executive Vice President and CFO. Following our prepared remarks, we'll host a question and answer session that will include John Roberts, Executive Vice President and Chief Operating Officer, Karen Lynch, Executive Vice President and President of Aetna, and Alan Lotfin, Executive Vice President and President of Caremark. In order to provide more people with the chance to ask a question during the Q&A, please limit yourself to no more than one question with a quick follow-up. In addition to this call, our press release and Form 10-Q, we have posted a slide presentation on our website. Please note that during this call, we will make certain forward-looking statements that reflect our current views, including our financial projections and statements related to our future financial performance, future events, industry and market conditions, and the future impact of COVID-19 on our enterprise. Our forward-looking statements are based on management's estimates, assumptions, and projections and are subject to significant uncertainties and other factors. many of which are beyond CVS Health's control, including the future impact of COVID-19 on our enterprise. We strongly encourage you to review the information we file with the SEC regarding these risks and uncertainties, in particular, those that are described in the risk factors section of our 2019 annual report on Form 10-K and the cautionary statement concerning forward-looking statements and risk factor disclosures in our quarterly reports on Form 10-Q. You should also review the section entitled Cautionary Statements Concerning Forward-Looking Statements in this morning's earnings press release. During this call, we will use non-GAAP financial measures when talking about the company's performance and financial condition. In accordance with SEC regulations, you can find a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in this morning's earnings press release and the reconciliation document posted on the investor relations portion of our website. And as always, today's call is being broadcast on our website where it will be archived for one year. Now, I'd like to turn the call over to Larry.

Thanks, Valerie. Good morning, everyone, and thank you for joining our 2020 Q1 earnings call. These are certainly unprecedented times for us all. And at CVS Health, our dedicated colleagues have been working on the front lines in the fight against the COVID-19 pandemic. responding in real time with solutions for consumers and patients across the country. And I'd like to take a moment to express my sincere gratitude to our colleagues for their work in all parts of our organization. They are doing a phenomenal job of responding to the needs of our communities, and I could not be more proud of their efforts. Now, as we all know, over the last couple of months, the situation has rapidly intensified as the pandemic has spread from coast to coast. Federal, state and local governments, in partnership with the private sector, have worked to curb the spread of the virus and its impact on our population and the economy. And CVS Health is one of the largest providers of essential services. We are supporting these efforts through our community reach, local presence, broad healthcare offerings, digital capabilities, and our hardworking colleagues. And we are part of the solution during these difficult times. So let me provide an overview of the actions we've taken in response to COVID-19 with two key priorities in mind. First is the well-being and safety of our colleagues, consumers, and communities we serve. Second is maintaining the continuity of our businesses and operations. Now, to do that, we are making investments to support our consumers, clients, and members while deepening our relationships and advancing our long-term strategy of being the most consumer-centric health company. Starting with our colleagues, we took swift action designed to keep them safe while we kept our stores and other operations up and running with minimal disruption. We implemented social distancing practices, enhanced cleaning protocols, distributed personal protective equipment, and outfitted stores with plexiglass barriers. We also provided our colleagues with enhanced benefits and resources, including family support and announced bonuses for our frontline colleagues for their outstanding work. All of these actions have helped ensure the continuity of our operations at a time when they are needed the most. For our consumers and members impacted by COVID-19, we are providing them with continued access to quality healthcare while relieving some of the added costs and stress resulting from the pandemic. As previously announced, we waived copays for COVID-19-related diagnostic testing for all of our insured members. For our commercial and Medicare Advantage members, we waived member out-of-pocket costs for COVID-19-related inpatient admissions and telemedicine visits through early June. We have taken a broad approach to helping address the mental and emotional health impacts of the pandemic, including access to telehealth and expanding our employee assistance programs for our members. We're also proactively reaching out to the most at-risk Aetna members to educate them about COVID-19 protection measures and resources available to them. And we're sending care packages to affected members to show our care and support. CVS Pharmacy has waived the fees associated with home delivery for prescriptions and accompanying front-store products for all consumers, And both Aetna and Caremark have worked with clients and their members to support medication access and adherence by waiving early refill limits and extending previously approved prior authorizations for maintenance medications. And for our Aetna contracted healthcare providers, we are streamlining processes, easing administrative policies, making timely payments, and enhancing telemedicine policies to allow them to focus on patient care. To support our communities, we are creating action-based solutions alongside local, state, and federal government partners, as well as industry peers. For example, across five states, we have opened large-scale COVID-19 testing sites. And to date, we have administered nearly 9,000 tests with real-time results. We are also working to further expand our testing capabilities, which will continue to play an important role in helping with the reopening of the economy. We recently expanded our core of services nationwide, working in partnership with hospitals and providers to help transition eligible IV therapy patients to home-based care, freeing up important hospital capacity. And finally, we are well positioned to provide medication therapies and vaccines when they become available at our retail pharmacy locations nationwide. Now, the actions we have taken all point to our strategy of making healthcare access local and simple while helping people achieve their best health. And we have worked to accelerate pilots and innovation, and in conjunction with additional actions such as relaxing regulation, we are seeing a new normal emerge. And in the near future, there will be an evaluation point of what worked and what didn't. And as a result, we expect that elements of today's new norm will become part of tomorrow's everyday routines. While the actions we have taken in response to the pandemic come at a cost, we believe these investments in our people and our businesses are the right decisions, and our differentiated offerings have enabled us to play a key role in responding to the pandemic. So what has been the response to the actions we have taken? Well, it is clear our consumer-centric digital strategy has become even more relevant in the current environment as people are using technology more while they stay in place. We've achieved higher levels of engagement across our digital assets in Q1, a trend which began in January and accelerated with COVID-19. And let me provide you a few examples. Utilization of telemedicine for virtual visits through MinuteClinic is up about 600% compared to Q1-19. Retail prescription home delivery is up more than 1,000%. Additionally, we saw a four-fold increase in the number of consumers adding front store items to their prescription deliveries. Let's call it the front store attachment rate. We also saw a double-digit percentage increase in app usage across CVS pharmacy, Caremark, and specialty year-over-year. And as an example, in specialty pharmacy, digital refills were up approximately 50%. Additionally, in our Aetna Health app, we engaged more households in Q1 than we did in the first three quarters of 2019. And to support our COVID-19 testing sites, our team used our digital platform to quickly launch a streamlined experience, which has enabled online screening and scheduling for testing, with 85% of consumers highlighting a positive experience. So we are pleased to see higher rates of customer satisfaction and loyalty, thanks to our colleagues' hard work and innovation. And we will continue to mobilize our resources to support nationwide efforts to combat the virus. So with that, let me quickly touch on our first quarter results and how COVID-19 has impacted our business performance. In the quarter, we delivered adjusted earnings per share of $1.91, with total revenues of nearly $67 billion, up 8%. Our underlying core performance was strong, and in March, COVID-19-related business activity added approximately 10 cents to our Q1 adjusted earnings per share. And our performance reflects an acceleration of prescriptions dispensed, strong front store sales, and a modest reduction in discretionary medical utilization, all largely driven by COVID-19. Now, we've been able to maintain an adequate supply of medications to meet the increased demand from our customers, benefiting from the scale and expertise of Red Oak. And setting aside the impact of COVID-19, our Q1 results demonstrate the continued success of our integrated healthcare strategy, which is resonating with stakeholders across the healthcare system. Now, we are leaving our full year 2020 adjusted EPS guidance range unchanged at $7.04 to $7.17, and Eva will take you through the key considerations on our guidance. It is important to note that there are a variety of actions and market forces that will present opportunities as well as risks. as we move forward. And rest assured, we are diligently working to minimize the adverse effects while harnessing the opportunities to expand access to affordable care and deliver cost-saving solutions to our clients and their members. CVS Health will continue to fight this pandemic on the front lines, and this challenging time demonstrates the importance of our holistic, consumer-centric, enterprise-wide approach. We are committed to supporting the nation so that we come out on the other side stronger together with the communities that we serve. And with that, I will turn the call over to Eva.