Delivering Value for All Health Care Stakeholders€¦ · 8 Our Competitive Advantage: Premier...

Delivering Value for All

Health Care Stakeholders

Larry Merlo

President & Chief Executive Officer

2

Agenda

Our Value Proposition Has Never Been Stronger

We See Compelling Opportunities in a Robust Health Care Market

How We’ll Drive Long-Term Enterprise Growth


…enabling us to deliver superior outcomes at a lower cost

3

The Most Extensive Suite of Leading Assets…

Patients

Payors Providers

Retail

MailLong-Term Care

Infusion

Medical Claims Editing

Digital

RetailClinics Specialty

Clinical Programs

CostManagement

Tools

4

Our Integrated Model Drives More Affordable, Accessible and Effective Care

Maintenance Choice

Specialty Connect

Pharmacy Advisor

Higher penetration rates of programs,

resulting in better outcomes

Clinical rules engine with powerful

analytical capabilities, providing real-

time, actionable information

Enabling single patient record and

simplicity of single digital platform to

manage all prescriptions

Full View of PatientHealth Engagement Engine

Appropriate Utilization, Better OutcomesProprietary Programs

5

Retail Pharmacy Competitors

Health

Systems

Providers Patients Senior

Living

Employers Government Health

Plans

Traditional Competitor Touchpoints Are Limited

6

PBM Competitors

Health

Systems


Living


Plans

Traditional Competitor Touchpoints Are Limited

7

Health

Systems


Living


Plans

Our Suite of Assets Provides Touchpoints Across All Health Care Stakeholders

8

Our Competitive Advantage:

Premier company with the ability to impact patients, payors and providers with innovative, channel-agnostic solutions

Unmatched CVS Pharmacy value proposition for all payors

Unparalleled scale in the U.S. making us a low-cost provider

Largest retail clinic operator, providing convenient, cost-effective care

Deep clinical expertise and insights enable us to help deliver superior outcomes at a lower cost

Leading pharmacy provider in long-term care, enabling broader patient reach across the care continuum

Broadest specialty capabilities to holistically manage patients in growing market

Site-of-care management capabilities to move patients to more cost-effective sites

Continued Selling Season Success …

9

More than $40 billion in gross

wins over past five years, with

client retention of 96% to 97%

Refer to endnotes for additional information.

…Fueling Growth in PBM Lives and Enterprise Volume

6268

72

80

89

2013 2014 2015 2016E 2017E

PBM Lives Under Management(millions)

10

1,045 1,0751,170

1,360 1,380

2013 2014 2015 2016E 2017E

Enterprise Rx Volume(Rx dispensed, millions)


11

Agenda



How We’ll Drive Long-Term Enterprise Growth



Growing Role of Digital

Increasing Consumerism / Retailization of Health Care

Focus on Trend Management

Evolving Role of Government in Health Care

Movement to Value-Based Care Slow, But Inevitable

Ongoing Benefits of Size and Scale

1

2

3

4

5

6

12

Annual Growth Rate(%, 2015-2025)

13

4.5%5.8%

6.7%

GrossDomesticProduct

HealthExpenditures

Drivers of Trend

Growth in Health Care and Pharmacy Spend Projected to Outpace GDP Growth

• Increased utilization

− Growing prevalence of chronic disease

• Rising prescription costs

− Growth in specialty

− Drug price inflation

PrescriptionDrug

Expenditures

T R E N D M A N A G E M E N T


14

Clients Continue to Value PBMs as anIndispensable Solution to Rising Costs

Disease/Condition Management

Full Replacement CDHP

Initiatives to Improve Well-Being

Increased Employee Cost-Sharing

Pharmacy Management Techniques

Clients’ Top Rated Cost Control Methods

68%

34%

34%

31%

30%



15

Suite of Capabilities ImprovingHealth Care Affordability

Utilization

Management

Formulary

Management

Network

Strategies

Generic

Programs

Cost Management Solutions

Site-Of-Care

Management

Medical Claims

Editing

Real-Time

Surveillance

Clinical

Programs

Cost management

solutions have

lowered client

trend to

3.3%



16

Mitigated Branded Price Increases WithCost Management Solutions

9.3% 10.0%11.5%

14.3%12.4%

8.7% 9.1%

4.9% 5.1%2.8%

2011 2012 2013 2014 2015

Branded Rx Price Growth(total market, IMS Health)

NetGross




17







1

2

3

4

5

6

18

Government Accounts for Two-Thirds of Health Insurance Spending

Government Health Insurance Spend($, trillions)

1.62.1

2.9

2015 2020E 2025E% of

insurance spend

66% 67% 68%

Key Drivers

• Growth in government programs

− Medicare

− Medicaid

• These businesses are lower margin,

but have higher utilization

G O V E R N M E N T


19

Demand for Cost-Effective Care Will Remain Despite Uncertainty Around Health Care Reform

U.S. Uninsured Rate Future Outlook

• Many unknowns around repeal

and replace

• Some ACA policies could remain, while

others could change

• Need for coverage expected to remain

14.3%

11.2%

8.3%

2012 2014 2016E

CVS Health can pivot to address policy changes with the right solutions

G O V E R N M E N T


Medicare Enrollment(lives, millions)

20

CVS Health Advantages

CVS Health Well-Positioned to Capitalizeon Growth in Medicare

• CVS Caremark: 12 million total

Med D members

− SilverScript is the largest PDP with 5.6

million members

− Also support Med D/MAPD offerings of

more than 40 health plans

• CVS Pharmacy: Medicare represents

23% of prescriptions dispensed

• Omnicare is a leading pharmacy

provider in the long-term care market

G O V E R N M E N T

54.062.6

71.6

2015E 2020E 2025E



21







1

2

3

4

5

6

22

Movement Towards Value-Based Care Creates Need for New Cost Management Solutions

Provider Reimbursements

Tied to Value

45%

~60%

Today 5 Years From Now

Despite the anticipated shift

of reimbursement to value-

based payments, only 26%of providers are currently

meeting their goals to lower

health care costs

Expectation is that value-based care will be key determinant of success

V A L U E - B A S E D C A R E


23

Multitude of Ways We Provide Cost-Effective Care

Providing health care services, including wellness and

chronic care supportMinuteClinic

Home or alternate-site infusion services can dramatically

lower costsInfusion

Avoiding costly hospital readmissions by preventing

lapses in adherenceCare Transitions

Driving Med D Star ratings through clinical capabilitiesMed D Star Ratings

Powered by Health Engagement Engine and brought to life

through face-to-face interactionsClinical Programs

Unique integrated programs, 90-day programs, formulary

designs and value-based contractingPharmacy Care

V A L U E - B A S E D C A R E

24








1

2

3

4

5

6

Unsurpassed Procurement Scale Through Enterprise Dispensing Volume

2016 Estimated Rx Volume(Rx dispensed, millions)

CVS Health Advantages

100

120

140

350

930

1,360

OptumRx

Anthem + Cigna

Aetna + Humana

Express Scripts

Walgreens

25

Unsurpassed scale and expertise

allows us to be an efficient

purchaser of pharmaceuticals

Procurement scale further

enhanced by Red Oak Sourcing

S I Z E A N D S C A L E


Ability to Aggregate Claims Volume CreatesValue for Clients

CVS Health Advantages2016 Estimated Claims Volume

(Rx managed, millions)

500

650

1,000

1,275

1,385

Anthem + Cigna

Aetna + Humana

OptumRx

Express Scripts

26

Managed claims volume supports

negotiations for:− Rebates

− Price protection

− Formulary placement

More than 90% of rebates overall

are passed back to clients

Competition in drug classes allows

us to utilize scale more effectively

S I Z E A N D S C A L E



27







1

2

3

4

5

6

Consumer-Directed Health Plans Gaining Traction

CDHP Prevalence(% of large employers)

Drivers of Trend

62%

84%92%

2010 2013 2016E 2019E

28

As member cost burden increases, mindset shifting from patient to consumer

• Employers looking to better control rising

health care costs

• Health insurance shoppers on public

exchanges choosing CDHPs

• Seek new, trusted health care advisors

Offered/ConsideringOffered

R E T A I L I Z A T I O N O F H E A L T H C A R E


29

We Own the Last Mile of Care Through Our Unmatched Patient Touchpoints

Retail Pharmacy

Mail

Specialty Retail Clinics

Long-Term Care

Infusion

No matter the road, we can shape behavior and drive outcomes

R E T A I L I Z A T I O N O F H E A L T H C A R E


30







1

2

3

4

5

6

31

CVS Health Digital Strategy Focused on Three Pillars

AdoptionOngoing

InnovationIntegrated CVS Health

Experience

• Attract new users

• Increase engagement

of active digital users

• Mobile engagement

• Data & personalization

• Digital health

• Core pharmacy

• Specialty

• Long-term care

• Omnichannel front store

• MinuteClinic

Enhance customer experience, drive loyalty and improve outcomes

D I G I T A L

32

Agenda



How We’ll Drive Long-Term Enterprise GrowthHow We’ll Drive Long-Term Enterprise Growth

33

Our Strategic Business Imperatives

Aggregate Lives

Grow Share

Execute With

Excellence

Drive Innovation

Enterprise Focus

Actions to achieve growth may change, strategic imperatives remain

34

Actions to Capitalize on Market Dynamics

Partner

More

Broadly

New,

Innovative

PBM Products

Enterprise

Streamlining

Initiative

Return

Value to

Shareholders

Sustainable

Enterprise

Growth

35


Partner More Broadly

• Utilize full suite of enterprise

capabilities to enhance CVS

Pharmacy value proposition

– Bundled service offerings

– Will make us partner of choice

• Clinical capabilities a competitive

edge in value-based care

• New strategic relationship

with Optum

Key Actions

Sustainable

Enterprise

Growth

Partner

More

Broadly

New,

Innovative

PBM Products

Enterprise

Streamlining

Initiative

Return

Value to

Shareholders

36


New, Innovative PBM Products

Sustainable

Enterprise

Growth

Partner

More

Broadly

New,

Innovative

PBM Products

Enterprise

Streamlining

Initiative

Return

Value to

Shareholders

• Clinical solutions to support all

stages of care

• Value-based contracting approaches

• New retail network strategies,

including performance-based

networks

• Maintenance Choice 3.0

• Ongoing innovations

Key Actions

37


Enterprise Streamlining Initiative

Sustainable

Enterprise

Growth

Partner

More

Broadly

New,

Innovative

PBM Products

Enterprise

Streamlining

Initiative

Return

Value to

Shareholders

• Further improve productivity to

solidify low cost provider status

• Three broad areas of focus:

– Store rationalization

– Enhance efficiency of corporate

shared services

– Optimize pharmacy

delivery platform

• Expect to generate nearly $3 billion

in cumulative savings by 2021

Key Actions

38


Return Value to Shareholders

Sustainable

Enterprise

Growth

Partner

More

Broadly

New,

Innovative

PBM Products

Enterprise

Streamlining

Initiative

Return

Value to

Shareholders

• Optimize use of capital to drive

shareholder returns

• Continue to evaluate strategic

opportunities to drive long-term

growth

• Annual dividend increases

• Share repurchases

Key Actions

Today’s Key Takeaways

Driving More Affordable, Accessible and Effective Care

In an era of rising costs, we are the optimal partner to deliver savings

and help improve outcomes for health care stakeholders

Driving Outcomes

and Savings

Pharmacy has the highest frequency of interaction, and our unmatched

patient touchpoints across the enterprise help shape behavior

Providing the Front

Door and the Last Mile

We can partner with all PBMs and health plans, leveraging our

enterprise assets and capabilities to meet their individual needs

Best Partner for PBMs

and Health Plans

Maximize shareholder value with an enterprise mindset; generate strong

cash flow and employ a disciplined approach to capital allocation

Positioned for L-T

Enterprise Growth

39

Our exclusive programs are seamlessly integrated through our Health

Engagement Engine, providing better member experience and results

Integrated

Pharmacy Care

Delivering Value for All Health Care Stakeholders

40

EndnotesSlide 9

1. As of December 2, 2016.

2. Gross new business revenues exclude Medicare Part D SilverScript individual products.

3. Client retention rate is defined as: 1 less (estimated lost revenues from any known terminations in that selling season year

plus annualization of any mid-year terminations, divided by estimated PBM revenues for that selling season year)

expressed as a percentage. Both terminations and PBM revenues exclude Medicare Part D SilverScript individual

products.

Slide 10

1. Enterprise dispensed Rx include prescriptions filled at CVS Pharmacy, mail order and specialty prescriptions filled at CVS

Caremark, and prescriptions filled by our long-term care pharmacies.

2. All dispensed CVS retail and mail prescriptions include the adjustment to convert 90-day prescriptions to the equivalent of

three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the

amount of product days supplied compared to a normal 30-day prescription.

3. Source: CVS Health internal analysis.

Slide 13

1. Source: CMS, National Health Expenditure Projections (figures as of July 14, 2016).

Slide 14

1. Source: National Business Group on Health, 2017 Large Employers’ Health Plan Design Survey, Figure 11.

41

EndnotesSlide 15

1. Source: CVS Health internal data analysis.

2. Utilization trend based on internal commercial cohort (Health Plans and Employers).

3. Trend is reported net of rebates.

Slide 16

1. Source: IMS Institute for Healthcare Informatics, Medicines Use and Spending in the U.S., Chart 3.

Slide 18

1. Source: McKinsey proprietary research.

2. Includes Medicare, Medicaid, and other federal, state programs (e.g. Children’s Health Insurance Program, Department of

Veterans Affairs, Department of Defense).

Slide 19

1. Source: CMS, National Health Expenditure Projections, Table 17: Health Insurance Enrollment and Enrollment Growth

Rates, Calendar Years, 2009-2025 (figures as of July 14, 2016).

Slide 20

1. Source: CMS, National Health Expenditure Projections, Table 17: Health Insurance Enrollment and Enrollment Growth

Rates, Calendar Years, 2009-2025 (figures as of July 14, 2016).

2. Source: CMS (membership figures as of October 7, 2016).

Slide 22

1. Source: McKesson, Journey to Value: The State of Value-Based Reimbursement in 2016, Figure 8.

2. Reimbursements tied to a value-based payment arrangement based on providers who use other models than 100% fee-

for-service only.

42

EndnotesSlide 25

1. Enterprise dispensed Rx include prescriptions filled at CVS Pharmacy, mail order and specialty prescriptions filled at CVS

Caremark, and prescriptions filled by our long-term care pharmacies.

2. All dispensed CVS retail and mail prescriptions include the adjustment to convert 90-day prescriptions to the equivalent of




Slide 26


2. CVS Caremark claims represent midpoint of guidance range.

3. Estimated managed claims include all CVS Caremark network claims plus specialty and adjusted mail claims.

4. All managed CVS Caremark mail prescriptions include the adjustment to convert 90-day prescriptions to the equivalent of



Slide 28

1. Source: National Business Group on Health, 2017 Large Employers’ Health Plan Design Survey, Figure 5.

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