Post on 13-May-2018
transcript
Driving EnterpriseDriving Enterprise Growth in an Evolving Health Care Market
Larry MerloPresident &Chi f E ti OffiChief Executive Officer
Agenda
Our Compelling Value PropositionOur Compelling Value PropositionOur Compelling Value PropositionOur Compelling Value Proposition
Evolving Health Care Market Creates OpportunitiesEvolving Health Care Market Creates Opportunities
Strategic Framework for Long-term Enterprise GrowthStrategic Framework for Long-term Enterprise Growth
2
The Most Extensive Suite of Leading Assets …
Retail MailMailLong-term
CareRetailClinics
Specialty
Infusion
Clinics
Clinical Programs
Patients Medical Claims
Digital
g
Payors ProvidersClaims Editing
… enabling us to help deliver superior outcomes at a lower cost
3
Continue to Build One-of-a-kind Health Care Company with Unmatched Integrated AssetsCompany with Unmatched Integrated Assets
: Our Competitive Edge
Only company with the ability to impact patients, payors and providers with innovative, channel-agnostic solutions
Broadest capabilities to holistically manage patients inBroadest capabilities to holistically manage patients infast-growing specialty market
Unparalleled scale in the U.S. makes us a low-cost provider
Largest retail clinic operator in U.S. with 28 million patient visits to date
D li i l ti d i i ht th t iDeep clinical expertise and insights across the enterpriseenable us to help deliver superior outcomes at a lower cost
Leading provider of pharmacy services in long-term care
4
g p p y g
Pharmacy Is Our Focus and We’ve Captured 39% of Past 5-Year Prescription Growthof Past 5 Year Prescription Growth
Total U.S. Rx Industry(Rx dispensed, billions)
5.5~710Mnew Rx
4.8
2010 2015E
5
Note:1. All prescriptions dispensed on a 30-day equivalent basis. Does not include Omnicare.Source: IMS data, CVS Health Internal Analysis.
Pharmacy Is Our Focus and We’ve Captured 39% of Past 5-Year Prescription Growthof Past 5 Year Prescription Growth
Total U.S. Rx Industry(Rx dispensed, billions)
5.5 CVS Healthshare of
market growth275M
~710Mnew Rx
4.8
market growth
39%
2010 2015E
Gaining share in a growing Rx industry
6
Note:1. All prescriptions dispensed on a 30-day equivalent basis. Does not include Omnicare.Source: IMS data, CVS Health Internal Analysis.
Prescription Growth Through Enterprise Channels Demonstrates Power of Unique, Integrated Model …Demonstrates Power of Unique, Integrated Model …
CVS/caremark Claims(Rx, millions)
9051,080 ~1,165
740905 Channel agnostic
offerings allow us to capture growth in
CVS/caremark claims
275 365 445 470
CVS/caremark claims while helping to drive
client savings
Notes:
2008 2011 2014 2015ECVS Health dispensed All other
Notes:1. CVS Health dispensed prescriptions include CVS/pharmacy, mail, CVS/specialty and Omnicare prescriptions across all years.2. CVS retail and mail prescriptions on a 30-day equivalent basis.3. 2015E is midpoint of guidance range.
7
… and Has Allowed Us to Capture 700 bps of Revenue Share, Equating to $7 BillionRevenue Share, Equating to $7 Billion
CVS/caremark Revenue($, billions)
70088
~100
$7
700 bpsincrease
=4459
$7 Billion
2008 2011 2014 2015E
48% 50% 53% 55%
Notes:
CVS Health share All other
Our outperformance in specialty is a key driver of revenue share gainsNotes:1. CVS Health share of CVS/caremark revenue equals CVS/caremark revenue dispensed through Enterprise channels (CVS/pharmacy, mail, CVS/specialty,
Omnicare) ÷ total CVS/caremark revenue.2. 2015E is midpoint of guidance range.
8
Agenda
Our Compelling Value Proposition
Evolving Health Care Market Creates OpportunitiesEvolving Health Care Market Creates Opportunities
Our Compelling Value Proposition
Evolving Health Care Market Creates OpportunitiesEvolving Health Care Market Creates Opportunities
Strategic Framework for Long-term Enterprise GrowthStrategic Framework for Long-term Enterprise Growth
9
Evolving Health Care Market Creates Opportunities
Demographics and Health Reform Continue to Transform the Market1 to Transform the Market
Specialty Growth Will Be Primary Driver of Pharmacy Trend
1
2
Retailization of Health Care Is Accelerating3
Increasing Focus on Outcomes4
5 Consolidation in the Health Plan Market5
10
Health Reform and Demographics Expanding Insured Population
1
Insured Population
Growth in U.S. Insured Lives(lives, millions)
1419 35286
306Individuals/Exchanges264
49 53 62
53 63 6514
Medicaid
Medicare
148 151 143 Employer-sponsored
2013 2015E 2019E
Medicare and Exchanges will be primary drivers
11
Source: CVS Health Internal Analysis; Medicare Trustees Report, 2015; Avalere Medicaid Model, September 2015; McKinsey MPACT 6.2, September 2014; CBO Public Exchange Estimates, March 2015; Accenture, 2015; Congressional Budget Office. Model assumes no additional Medicaid expansion in the 20 non-expansion states, further Medicaid expansion could improve long-term covered lives outlook. Figures may not foot due to rounding.
Aging U.S. Population Will Drive Prescription Utilization …
1
Utilization …
U.S. Population Aged 65+(lives, millions)
Retail Prescription Utilizationby Age Group
65.9
y g p(Rx per member per year)
+18Mlives
47.8
56.4 36.665+
16.219-64
2015E 2020E 2025E
4.10-18
Sources:1. U.S. Census Bureau.2. Utilization based on CVS/caremark book of business; all prescriptions on a 30-day equivalent basis; excludes Aetna.
12
… and Fuel Growth in Prescription Expenditures 1
U.S. Prescription Drug Expenditures($, billions)
464
5646.2%CAGR
328385
464
2015E 2018E 2021E 2024E
13
Source: CMS, Office of the Actuary, Prescription Drug Expenditures (figures as of July 30, 2015).
Pharmacy Is One of the Most Cost-efficient Ways to Manage Overall Health Care Costs
1
Ways to Manage Overall Health Care Costs
Healthcare Savings from Improved Adherence(PMPY)
Hyperlipidemia Diabetes Hypertension
$5,883 $5,676ROI9X ROI
9X
$3,311ROI5.5X
9X
($601) ($656) ($629)Added Rx spend Medical and productivity savings
14
Source: Roebuck MC, Liberman JN, Gemmill-Toyama M, Brennan TA. Medication adherence leads to lower health care use and costs despite increased drug spending. Health Affairs. 2011;30(1):91-99. Carls GS, Roebuck MC, Brennan TA, Slezak JA, Matlin OS, Gibson TB. Impact of medication adherence on worker productivity: an instrumental variables analysis in five chronic diseases. JOEM, 2012. Cholesterol savings from generic medications only.
CVS Health Can More Broadly Reach Patients Across the Continuum of Care
1
Across the Continuum of Care
CVS Health Standalone StandaloneCVS Health Retailer PBM
Retail pharmacy
Mail Order
Specialty/Infusion
LTC pharmacy
Retail clinics
Clinical programs
Channel connectivity
15
Growth in U.S. Population Over 85 Underscores Need for Long-term Care
1
Need for Long term Care
U.S. Population Aged 85+(lives, millions)
Omnicare is a leading pharmacy services provider to LTC facilities
11.9
• Nationwide footprint with leading positions in Assisted Living and Skilled Nursing facilities
~2X
6 37.5
g
• Ability to leverage clinical insights to improve care for patients
• CVS Health brings capabilities to6.3 CVS Health brings capabilities to better serve patients across the continuum of care
2015E 2025E 2035E
Source: U.S. Census Bureau.
16
Evolving Health Care Market Creates Opportunities
Demographics and Health Reform Continue to Transform the Market1 to Transform the Market
Specialty Growth Will Be Primary Driver of Pharmacy Trend
1
2
Retailization of Health Care Is Accelerating3
Increasing Focus on Outcomes4
5 Consolidation in the Health Plan Market5
17
Specialty Growth Will Be Primary Driver of Pharmacy Trend
2
Pharmacy Trend
Addressable Specialty Industry($, billions)
22014%CAGR
130
65
2012 2016E 2020E
18
Note:1. Addressable specialty industry currently excludes infused oncology.Source: NHE, Artemetrx, CVS Health Internal Analysis, 2015.
We Are Well-positioned as the Largest and Fastest-growing Specialty Pharmacy in the U.S. …
2
Fastest growing Specialty Pharmacy in the U.S. …
CVS Health Specialty Revenue($, billions)
4927%
40
30
CAGR
2219
2012 2013 2014 2015E 2016EDispensed Managed ACS (Omnicare)
19
.Source: CVS Health Internal Analysis. Does not include specialty revenue from Target pharmacies.
… with the Broadest Capabilities to Manage Trend and Improve Care
2
• Formulary strategies offer drug exclusions, step therapy and new-to-market control
Trend and Improve Care
FormularySolutions
• Exclusive Choice network can help reduce trend and drive incremental savings
and new-to-market controlSolutions
NetworkDesign
H lt t it i f i i
• Cost-effective, clinically-appropriate therapy solutions for each patient
Utilization Management
Sit f • Home or alternate-site infusion services can dramatically lower costs
• Novologix platform enables editing and re-pricing for
Site-of-careManagement
Medical Claims medical pharmacy claimsClaimsEditing
• Certified nurse case managers provide clinical supportCareCoordination
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Evolving Health Care Market Creates Opportunities
Demographics and Health Reform Continue to Transform the Market1 to Transform the Market
Specialty Growth Will Be Primary Driver of Pharmacy Trend
1
2
Retailization of Health Care Is Accelerating3
Increasing Focus on Outcomes4
5 Consolidation in the Health Plan Market5
21
Retailization of Health Care Continues with Growth in Consumer-directed Health Plans
3
Growth in Consumer directed Health Plans
CDHP Enrollment(lives, millions) Drivers of Trend
• Employers looking to CDHPsto help control mounting health care costs
30 5
37.525%
− Employees have accountability in their health care decision-making
• Growth in CDHPs also driven by 22.0
30.5CAGR
health insurance choosers on the exchanges
6.1
12.5
2006 2008 2010 2012 2014
22
Sources: AIS’s Inside Consumer Directed Care; Kaiser; AHIP surveys.
Promoting Healthy Behavior Is Critical in Avoiding Unintended Consequences with CDHPs
3
As Patient Cost Share Rises…
Avoiding Unintended Consequences with CDHPs
CVS Health Advantages
More than 9,500 convenient locations
Costsustaining adherence CVS/minuteclinic
Innovative plan design options
Cost… sustaining adherence becomes more challenging
… patients may choose to cut th i h lth d
Unique programs: Pharmacy Advisor
Trusted brandAdherence
corners on their health andwellness needs to avoid costs
CVS Health is best-positioned to meet consumer needs
Trusted brand
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Note:1. Retail pharmacy locations include more than 1,660 Target locations.
Example: Reduced Co-pay for Key Maintenance Medications Improves Adherence in CDHPs
3
Medications Improves Adherence in CDHPs
Member Adherence to Prescribed Hyperlipidemia Medication
82%
+130bps
Initiators Continuers
80% 82%+560bps
57%63%
Notes:1 Initiators defined as patients starting therapy during study period Continuers defined as patients on therapy before study period
With preventative drug listWithout preventative drug list
24
1. Initiators defined as patients starting therapy during study period. Continuers defined as patients on therapy before study period.2. Member adherence defined as average monthly proportion of days covered (PDC).Source: CVS/caremark Enterprise Analytics: Study of CDHP Design Impact on Utilization and Medication Adherence, 2014. Study based on subset of CVS/caremark book of business.
Evolving Health Care Market Creates Opportunities
Demographics and Health Reform Continue to Transform the Market1 to Transform the Market
Specialty Growth Will Be Primary Driver of Pharmacy Trend
1
2
Retailization of Health Care Is Accelerating3
Increasing Focus on Outcomes4
5 Consolidation in the Health Plan Market5
25
Payment Models Continue to Evolve Away fromFee-for-service and Towards Value-based Payments
4
Fee for service and Towards Value based Payments
Medicare Reimbursement by Payment Model
52%33%
18%34%
52%
Two-thirds in alternative
30% 33%
2015E 2018E
alternative models
Medicare Advantage Value-based FFS Volume-based FFS
By 2018, two-thirds of Medicare payments in alternative models
26
Source: Burwell S. Setting Value-Based Payment Goals – HHS Efforts to Improve U.S. Health Care. The New England Journal of Medicine. 2015; 372:897-899.
Public and Private Payors Taking Steps to Managing Outcomes and Total Cost of Care
4
Managing Outcomes and Total Cost of Care
Medicaremandatory bundles
for hips/knees
Largest health systems pledge to move
75% of business intovalue-based arrangements
2016 2017 2020
Medicare Part D Enhanced MTM modelEnhanced MTM model
Sources:
27
Sources:1. HHS, CMS finalizes bundled payment initiative for hip and knee replacements, November 2015.2. CMS, CMS announces Part D Enhanced Medication Therapy Management Model, September 2015.3. Health Care Transformation Task Force, Major Health Care Players Unite to Accelerate Transformation of US Health Care System, January 2015.
CVS Health Can Support Health Systems Across the Payment Continuum
4
the Payment Continuum
Evolving Contracting ArrangementsBirmingham, Sacramento,CAEvolving Contracting Arrangements
AL CA
Fee for Service(FFS)
FFS with Pay for
Performance
Bundled Payments
Shared Savings
Shared Risk
Global Capitation
28
Full Range of Tools and Services to Support Differentiated Needs of Providers
4
Health Hospital
Differentiated Needs of Providers
CVS/minuteclinic Engagement Engine
Hospital Transitions
Complementary health Powerful analytics Assisting patients to
Epic EMR
Enhanced connectivityComplementary health care services
Wellness and chronic care support
Powerful analytics capabilities
Essential in helping manage population health
Assisting patients to avoid adherence lapses
Enhanced care coordination
Enhanced connectivity to the health care system
>60% of Americans have Epic recordp
Well-positioned to excel regardless of how market evolves
29
CVS Health Best-in-class Tools to Drive Adherence 4
Medication Possession RatioDi b t Ch l t l H t i
83 84
DiabetesTherapy
CholesterolTherapy
HypertensionTherapy
+580bps
+650bps
73
77 7880+700
bps
bps
73
Top 3 Retail
CVS/pharmacy
Top 3 Retail
Top 3 Retail
CVS/pharmacy
CVS/pharmacy
Adherence for these common conditions can drive Star ratings
30
Note:1. Adherence measured by Medication Possession Ratio, calculated as total days supply divided by total days in evaluation period.Source: CVS Health Internal Analysis, based on rolling 12 month period: November 2014 to October 2015.
CVS Health Can Directly Impact a Significant Portion of Star Metrics, Driving Outperformance Largest Med D PDP to Achieve a 4-Star Rating for the 2016 Plan Year
4
Portion of Star Metrics, Driving Outperformance
Largest PDPs by Enrollment(lives, millions) Star
for the 2016 Plan Year
4 5
5.4
CVS Health
OptumRx 3.0
4 0
Star Rating
2 8
4.4
4.5
Express Scripts
Humana
CVS Health 4.0
3.5
4 0
1.5
1.5
2.8
Aetna
CIGNA
Express Scripts 4.0
3.0
3.0
1.0WellCare 2.6
Note:
31
Note:1. Star Rating based on weighted average enrollment by parent organization. Only plans that were CVS/caremark managed for the 2016 measurement period
and received a Star rating were included.Source: CMS (membership figures as of October 9, 2015), CVS Health Internal Analysis.
CVS Health Can Directly Impact a Significant Portion of Star Metrics, Driving Outperformance
4
Portion of Star Metrics, Driving Outperformance
Largest PDPs by Enrollment(lives, millions) Star
SilverScript is excelling…
O l PDP ith 50% l
4 5
5.4
CVS Health
OptumRx 3.0
4 0
Star Rating • Only PDP with >50% low-
income-subsidy lives to achieve 4 Star rating
2 8
4.4
4.5
Express Scripts
Humana
CVS Health 4.0
3.5
4 0
And we’re helping clients achieve their goals…
• Ability to directly impact more
1.5
1.5
2.8
Aetna
CIGNA
Express Scripts 4.0
3.0
3.0
y y pthan 80% of Med D and 55% of MAPD Star metrics
• Client lives in high performing
1.0WellCare 2.6
Note:
g p gplans: 73% vs. 49% for the overall market
32
Note:1. Star Rating based on weighted average enrollment by parent organization. Only plans that were CVS/caremark managed for the 2016 measurement period
and received a Star rating were included.Source: CMS (membership figures as of October 9, 2015), CVS Health Internal Analysis.
Evolving Health Care Market Creates Opportunities
Demographics and Health Reform Continue to Transform the Market1 to Transform the Market
Specialty Growth Will Be Primary Driver of Pharmacy Trend
1
2
Retailization of Health Care Is Accelerating3
Increasing Focus on Outcomes4
5 Consolidation in the Health Plan Market5
33
We Can Partner with Health Plans in a Multitudeof Ways to Drive Value
5
of Ways to Drive Value
Strong procurement Broad service Pharmacy is Unique ability procurement
capabilities and claims scale
makes
portfolio to support plan
needs whether or not we are
your focus and a
key lever for managing
overall health
q yto leverage consumer insights
to improveus a low-cost provider
or not we are the PBM
overall health costs
to improvecare
34
After Consolidation, Regional and Blues Plans Will Still Manage More Than Half of Total Lives
5
Will Still Manage More Than Half of Total Lives
AetnaAetnaHumana
Nationals Nationals Anthem 46%Cigna
Anthem
UnitedUnited
RegionalsRegionals
54%BluesBlues
35
Future MarketMarket Today
We Dispense 8X to 11X the Prescription Volume of the Proposed Combinations …
5
Volume of the Proposed Combinations …
2015 Estimated Rx Volume(Rx dispensed, millions) CVS Health Advantages
1,350• Generic purchasing scale makes
us a low-cost provider
Scale is further enhanced by Red• Scale is further enhanced by Red Oak sourcing
~8X ~11X
170 120
CVS Aetna AnthemCVS Health
Aetna Humana
Anthem Cigna
Notes:
36
Notes:1. Estimated dispensed Rx include prescriptions filled at CVS/pharmacy and mail order and specialty prescriptions filled at CVS/caremark.2. Estimated dispensed Rx also displayed on a pro forma basis to include full year 2015 Dispensed Rx volume from Omnicare and Target.Source: CVS Health Internal Analysis, Company disclosures. All prescriptions dispensed on a 30-day equivalent basis.
… and We Manage 2X to 3X the Claims Volume of the Proposed Combinations
5
Volume of the Proposed Combinations
CVS Health Advantages2015 Estimated Claims Volume
(Rx managed, millions)
1,165
2X
• Substantial managed claims volume supports negotiations for rebates / formulary placement
600480
~2X ~3X • Creates value as majority of rebates are passed to clients
CVS / Aetna AnthemCVS / caremark
Aetna Humana
Anthem Cigna
37
Note:1. Estimated managed claims include all CVS/caremark network claims plus specialty and adjusted mail claims.Source: CVS Health Internal Analysis, Company disclosures. CVS/caremark claims represent midpoint of guidance range.
We Dispense 8X to 11X and Manage 2X to 3X the Volumes of the Proposed Combinations
5
Volumes of the Proposed Combinations
2015 Estimated Rx Volume(Rx dispensed, millions)
2015 Estimated Claims Volume(Rx managed, millions)
1,350 1,165
2X
~8X ~11X 600480
~2X ~3X
170 120
CVS Aetna Anthem CVS / Aetna Anthem
Note: Estimated dispensed Rx include prescriptions filled at CVS/pharmacy and mail order and specialty prescriptions filled at CVS/caremark Dispensed Rx also
CVS Health
Aetna Humana
Anthem Cigna
CVS / caremark
Aetna Humana
Anthem Cigna
Scale is critical to being a low-cost provider
38
Note: Estimated dispensed Rx include prescriptions filled at CVS/pharmacy and mail order and specialty prescriptions filled at CVS/caremark. Dispensed Rx also displayed on a pro forma basis to include full year 2015 Dispensed Rx volume from Omnicare and Target. Estimated dispensed prescriptions on a 30-day equivalent basis. Estimated managed claims include all CVS/caremark network claims plus specialty and adjusted mail claims.Source: CVS Health Internal Analysis, Company disclosures. CVS claims represent midpoint of guidance range.
Agenda
Our Compelling Value Proposition
Evolving Health Care Market Creates Opportunities
Our Compelling Value Proposition
Strategic Framework for Long-term Enterprise GrowthStrategic Framework for Long-term Enterprise Growth
Evolving Health Care Market Creates Opportunities
Strategic Framework for Long-term Enterprise GrowthStrategic Framework for Long-term Enterprise Growth
39
Our Strategic Business Imperatives
AggregateLives
GrowShare
Execute with Excellence
DriveInnovation
Enterprise Focus
Grow the core, Broaden the base
40
Our Strategy for Long-term Enterprise Growth
5Opportunistic bolt-on acquisitions4
5
Continued innovation in drug procurement and supply chain efficiencies3
Enhance patient engagement
Deepen relationships with payors and providers
2Deepen relationships with payors and providers to help reduce cost and improve outcomes
Add capabilities to enhance core business
1
41
p
Today’s Key Takeaways
The Right Strategy for an Evolving Health Care MarketThe Right Strategy for an Evolving Health Care Market
Leadership in multiple competencies to drive superior l f h lth t
Demonstrating Valuevalue for health care partnersto People, Payors and Providers
Expanding core pharmacy business while broadening Growing the Core, p g p y greach into new health care channels
g ,Broadening the Base
I t d i i ti d t d ki l tAlways Looking Introducing innovative products and making long-term, value-enhancing investments
Always Looking Ahead
Driving shareholder value with strong earnings and cash flow as well as disciplined capital allocation
Driving Sustainable Enterprise Growth
Driving Enterprise Growth in an Evolving Health Care Market