The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Fortune Global 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Fortune 500

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

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The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are insurance and managed care, medical products and facilities, pharmacy services, and pharmaceutical companies.

Fortune Sector Leaders: Health Care

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

WMA 2024-CVS

World's Most Admired Companies

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

WMA-2023-CVS

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-CVS Health

The health retail, pharmacy, and insurance conglomerate is the largest company ever to be led by a female CEO; Karen Lynch has been chief executive since Feb. 2021. 
<ul> 
 	<li>CVS exceeded Wall Street’s revenue expectations in 2022 with $322 billion, but profits fell nearly 50% compared to 2021.</li> 
 	<li>The company made progress in expanding into the primary care space with two big acquisitions: primary care network Oak Street Health, purchased for approximately $10.6 billion; and health services company Signify Health, for approximately $8 billion. The deals were completed earlier than anticipated, prompting the company to lower its earnings expectations for 2023.</li> 
 	<li>CVS joined other health care companies in settling lawsuits that claimed they should have known they were filling too many opioid prescriptions. Under a settlement announced in December, CVS will pay state and local governments up to $4.9 billion over 10 years. (The company did not admit wrongdoing.)</li> 
</ul>

The 300 companies on this list are transforming industries from the inside out.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500 2023-CVS Health

The health retail, pharmacy, and insurance conglomerate led by Karen Lynch is one of the nation’s two biggest health care companies. It’s also the biggest company ever to be led by a female CEO. 
<ul> 
 	<li>CVS exceeded Wall Street’s revenue expectations in 2022 with $322 billion, but profits fell nearly 50% compared to 2021.</li> 
 	<li>The company made progress in expanding into the primary care space with two big acquisitions: primary care network Oak Street Health, purchased for approximately $10.6 billion; and health services company Signify Health, for approximately $8 billion. The deals were completed earlier than expected, prompting the company to pull back on earnings expectations for 2023.</li> 
 	<li>CVS joined other health care companies in settling lawsuits that claimed they should have known they were filling too many opioid prescriptions. Under a settlement announced in December, CVS will pay state and local governments up to $4.9 billion over 10 years. (The company did not admit wrongdoing.)</li> 
</ul>

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

WMAC-2022-27-CVS

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

G500 2022-10-CVS Health

CVS outpaced analyst expectations for 2021 under the leadership of Karen Lynch, who came aboard as CEO in February. The company reported $292 billion in revenue for the fiscal year ended December 2021—an 8.7% increase year over year. In a quest to revolutionize America’s access to health care, Lynch initiated a plan to transform hundreds of CVS stores into super-clinics that provide primary care—creating what will become the nation’s biggest network of urgent care and primary care outlets. CVS also played a major role in fighting COVID-19, administering over 50 million vaccines and 29 million tests through December 2021. In the fight to retain talent, CVS announced a minimum wage increase to $15 an hour, effective July 2022.

Fortune collaborated with the Diligent Institute to rank the most innovative boards of directors among S&P 500.

Modern Board 2022-CVS Health

CVS, the retail and pharmacy giant that ranks fourth on the <a href="https://fortune.com/fortune500/">Fortune</a> 500, scored high on gender equality, board independence, and ESG. Karen Lynch was named CEO in February 2021 and <a href="https://fortune.com/2021/10/04/cvs-ceo-karen-lynch-stores-health-care-super-clinics/">has said the company</a> is “pivoting to become more central to America’s health care.” The company recently made the decision to <a href="https://fortune.com/2021/08/04/cvs-minimum-wage-t15-an-hour/">raise its minimum wage</a> to $15. 
 
CVS counts the former CEOs of Chiquita Brands; AT&amp;T; Becton, Dickinson; Johnson &amp; Johnson; PCS Health Systems; and Applied Biosystems among its directors. The board also has two members with high-level government experience: Nancy-Ann DeParle is the former deputy chief of staff and director of the White House Office of Health Reform, and Mary Schapiro is a former chairman of the Securities and Exchange Commission. 
 
Editor's note: An earlier version of this post misspelled the name of Nancy-Ann DeParle.

Fortune Modern Board 25

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CTW.1122. CVS Aetna

CVS-owned Aetna last year launched an effort to reduce suicide attempts. Its clinicians began asking mental health screening questions of most members, rather than querying only those who showed risk of self-harm; it also reached out to high-risk youth. Aetna has seen an 18% decrease in suicide attempts since 2019 among its 16.3 million adult members with behavioral health coverage—a promising start.

Change the World

This year’s Fortune 500 marks the 68th running of the list.

F500 2022 CVS Health

CVS outpaced analyst expectations for 2021 under the leadership of Karen Lynch, who came aboard as CEO in February. The company reported $292 billion in revenue for the fiscal year that ended in December 2021—an 8.7% increase year over year. In a quest to revolutionize America’s access to health care, Lynch initiated a plan to transform hundreds of CVS stores into super-clinics that provide primary care—creating what will become the nation’s biggest network of urgent care and primary care outlets. CVS also played a major role in fighting COVID-19, administering over 50 million vaccines and 29 million tests through December 2021. In the fight to retain talent, CVS has announced a minimum wage increase to $15 an hour, effective July 2022.

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Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-007-CVS

CVS embedded itself on the front lines of the COVID pandemic as one of the central hubs for distributing vaccines to local communities. In the first quarter of 2021 alone, the company, now fully integrated with health insurer Aetna following a mammoth $69 billion acquisition, produced more than $69 billion in revenues. In 2020, revenue grew $12 billion compared to the previous year. Karen Lynch, who became CEO in February 2021, believes that “millions of new customers will engage with CVS Health for the first time through testing and vaccine administration.” The company’s upbeat guidance for 2021, meanwhile, relies on pharmacy sales, rather than retail, to carry the revenue growth.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-04-CVS Health

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-013-CVS-Health

The drug store chain-slash-health care juggernaut got a $62 billion revenue boost—due to its $69 billion acquisition of Aetna, the insurance giant, in 2018. Though investors haven’t entirely sweetened on the deal, CEO Larry Merlo pronounced the integration of the two companies “successful” in February. Former Aetna CEO Mark Bertolini, meanwhile, resigned from the CVS board and said the integration was “far from over.” As a pharmacy retailer on the pandemic’s frontlines, CVS’s sales were brisk in the first quarter, but Merlo has warned about the “uncertainties” that surround the long-term performance of the company’s multifaceted business in a time of COVID-19.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-005-CVS-Health

The drug store chain-slash-health care juggernaut leapt three spots on this year's Fortune 500—and got a $62 billion revenue boost—due to its $69 billion acquisition of Aetna, the insurance giant, in 2018. Though investors haven’t entirely sweetened on the deal, CEO Larry Merlo pronounced the integration of the two companies “successful” in February; former Aetna CEO Mark Bertolini, meanwhile, resigned from the CVS board and said the integration was “far from over.” As a pharmacy retailer on the pandemic’s frontlines, CVS’s sales were brisk in the first quarter, but Merlo has warned about the “uncertainties” that surround the long-term performance of the company’s multifaceted business in a time of COVID-19.

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Change The World

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Headquartered in Woonsocket, R.I., CVS Health owns the country’s largest pharmacy chain with more than 9,000 physical locations found mostly in the Northeastern U.S. The publicly traded corporation is comprised of more than 300,000 employees and offers pharmacy services, health and beauty products, convenience foods, and other services like photo printing. CVS Health didn’t start adding pharmacies to new stores until 1967, but since then has acquired large companies in the health space such as Aetna, Signify Health, and Oak Street Health to boost its primary care offerings and develop its own insurance arm. Other subsidiaries of CVS Health include benefit services manager CVS Caremark and MinuteClinic, a walk-in health clinic for vaccinations, health screenings, and other quick appointments.

Q2 2025

Q1 2025

Q4 2024

David Joyner

President and Chief Executive Officer, CVS Health®

Sree Chaguturu, MD

Executive Vice President and Chief Medical Officer, CVS Health®

Thomas F. Cowhey

Executive Vice President and Chief Financial Officer of CVS Health®

Sam Khichi

Executive Vice President, Chief Policy Officer and General Counsel, CVS Health®

Tilak Mandadi

Executive Vice President, Ventures and Chief Digital, Data, Analytics and Technology Officer, CVS Health®

Larry McGrath

Executive Vice President, Chief Strategy Officer and Chief Strategic Advisor to the CEO of CVS Health®

Michelle Peluso

Executive Vice President and Chief Customer and Experience Officer, CVS Health®

Mike Pykosz

Executive Vice President and President of Health Care Delivery, CVS Health®

Prem Shah

Executive Vice President, Chief Pharmacy Officer, and President of Pharmacy and Consumer Wellness, CVS Health®

CVS Health (CVS): Company Profile, Stock Price, News, Rankings

legacy

CVS Health

cvs health

Good morning, and thank you all for attending the CVS Health Q4 twenty twenty four Earnings Conference Call. My name is Brika, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Larry McGrath, Chief Strategy Officer. Thank you.

Good morning, and welcome to the CVS Health's fourth quarter and full year twenty twenty four earnings call and webcast. I'm Larry McGrath, Chief Strategy Officer. I'm joined this morning by David Joyner, President and Chief Executive Officer and Tom Cowie, Chief Financial Officer. Following our prepared remarks, we'll host a question and answer session that will include additional members to the leadership team. Our press release and slide presentation have been posted to our website along with our Form 10 K filed this morning with the SEC.

Today's call is also being broadcast on our website where it will be archived for one year. During this call, we'll make certain forward looking statements. Our forward looking statements are subject to significant risks and uncertainties that could cause actual results to differ materially from currently projected results. We strongly encourage you to review the reports we filed with the SEC regarding these risks and uncertainties, in particular those that are described in the cautionary statement concerning forward looking statements and risk factors in our annual report on Form 10 K filed this morning and on our recent filings on Form eight K, including this morning's earnings press release. During this call, we'll use non GAAP measures when talking about the company's financial performance and financial condition.

And you can find a reconciliation of these non GAAP measures in this morning's press release and in the reconciliation document posted to the Investor Relations portion of our website. With that, I'd like to turn the call over to David. David?

Thank you, Larry, and good morning, everyone. This morning, we reported fourth quarter adjusted earnings per share of $1.19 and adjusted operating income of $2,700,000,000 We also provided our initial full year 2025 guidance for adjusted EPS in the range of $5.75 to $6 Our initial expectations reflect meaningful recovery in our Aetna business, particularly in Medicare Advantage, as well as continued growth in health services. Tom will provide a more detailed overview of the components of this guidance as well as a breakdown by segment. I'd like to spend some time taking a step back and sharing with you my observations during my first one hundred days as CEO. During this time, I have connected with shareholders, customers and clients.

I have met with and heard from elected officials and importantly, I have spent a great deal of time listening to our consumers and colleagues. I've come away inspired from these conversations and with a clear and strengthened understanding of what we need to do to realize the tremendous promise of CVS Health. We can be America's leading and most trusted healthcare company, a company that measures itself by its ability to improve outcomes, increase access and lower the cost of care, while ensuring a consumer experience that we can be proud of. The combination of these measures will ultimately deliver greater shareholder value. What makes me confident that we can deliver on this promise?

One, CVS Health's collection of assets is reached, is connection with 185,000,000 Americans whether in our stores or clinics, through our health plan or by managing their pharmacy benefits, CVS Health is unlike any other company in The United States and with that comes opportunity and a responsibility to make a difference. We take this responsibility seriously and have shown that throughout our history. We did this ten years ago when we removed tobacco from our stores. We did this with urgency when the country needed us during the pandemic and we do this today as we fight rising drug prices as we create a viable biosimilar market and as we innovate the pharmacy model to reduce frictions in the healthcare system to name a few. We will continue to deliver on this responsibility by being innovative and bold to do what's right for our consumers and customers.

Two, our over 300,000 colleagues reflect the backgrounds and experiences of all Americans and the communities we serve. I can say every day that our colleagues come to work dedicated to making healthcare in America better for those we serve. In my conversations with our colleagues, I'm proud to say that there are many thousands of inspiring stories for everyone where we could have done better. Three, while there are external factors that pose near term challenges, there are also many reasons to be excited. The broader demographic trends of an aging population, advances in AI and technology, the need for more personalized care and the expectations of the American public to create an improved consumer experience for opportunities where we are best positioned to lead.

How will we realize this over the short and long term? Our leadership team and I have spent our time together developing a clear set of priorities. Collectively, we are committed to delivering on the promise of CVS Health. We believe that aligning the power of our employees and the CVS Health enterprise behind four specific priorities will deliver on our potential and ultimately the results and experiences that we can all be proud of. First, ensuring that each one of our business is best in class for strong execution.

Most importantly, we need to deliver on our turnaround at Aetna and restore this business to target margins second, continuing to develop our integrated capabilities where it matters in order to make healthcare better, more affordable and more accessible third, advancing our leading digital strategy and investing in emerging technologies that drive simplicity and efficiency while delivering better experiences for the people we serve And finally, ensuring that we are disciplined stewards of capital as we continue to strengthen our balance sheet, manage our portfolio of businesses and deploy capital to create value for our shareholders. I'm working closely with my team to ensure we have the right talent, structures and collaboration across our enterprise to execute and deliver on these important priorities. CVS Health operates in some of the most critical areas of healthcare and our connections to the people we serve across the country has never been more important because of the challenges we see throughout The U. S. Healthcare system.

Rising healthcare costs put pressure on consumers as they see increasing challenges with affordability. These rising healthcare costs also put pressure on employers and the government who largely pay the bill for healthcare. To be clear, healthcare costs are increasing because of the combination of greater utilization, rising provider costs, labor shortages and dramatic price hikes for branded pharmaceuticals. Our teams are focused on delivering on our mission and we are working hard to directly address the challenges in the healthcare system. We are using tools across our enterprise to deliver exceptional value and differentiated experiences to our customers and clients.

One of the most powerful forces helping to offset rising healthcare costs are PBMs like Caremark. These entities remain the only part of the drug supply chain entirely focused on lowering costs, but have erroneously been subject to deceptive rhetoric and misinformation. For more than three decades, PBMs have been a proven unequivocal mechanism to negotiate down the price of drugs for payers and consumers while promoting better adherence and better health. In drugs that have no rebates where PBM tools are limited, we've seen egregious price hikes with prices for those drugs increasing more than twice as fast as drugs where we can secure rebates. In the first three weeks of January alone, branded drug manufacturers added $21,000,000,000 of annual gross drug spend through their price actions.

Our work is a critical counterbalance to the monopolistic tendencies of drug manufacturers. This is why PBMs are needed and why manufacturers fight so hard to limit our capabilities. Multiple well known economists have estimated that PBMs generate net value for The U. S. Healthcare system of over $100,000,000,000 per year.

No one has demonstrated more success than the PBMs at driving down drug prices. Perfect example is the prior administration's negotiated maximum fair price or MFP for the first ten drugs selected as part of the Inflation Reduction Act. Not only have PBMs kept the rate of drug inflation in Medicare Part D at 1.3% per annum over the last eighteen years, CVS Caremark specifically negotiated rates that contributed to a $1,000,000,000 improvement better than MFP. More importantly, if we don't continue to negotiate further discounts beyond MFP, the lost savings will go directly into the pockets of drug manufacturers. So when you look at all the data, not cherry pick data points like those specifically referenced in the FTC interim reports, the conclusion is clear.

PBMs deliver savings to their clients. Aramark has been and continues to be a critical solution to help ensure Americans pay less for drugs. We will continue to play our unique role in the drug supply chain, bringing the full breadth of our capabilities and market expertise to reduce drug prices for all customers. Throughout our history, we've led our industry in innovating to solve the issues most important to our clients and customers, whether it's cost, transparency, access to care or experiences. A recent example of how we're using our enterprise assets to solve important issues for our clients and help offset the rising healthcare costs is through actions we've taken in the biosimilar market.

In 2024, through the combination of Cordovis, Caremark and CVS Specialty, we converted more than ninety percent of eligible HUMIRA patients to a biosimilar at a list price that was more than 80% below the price of branded HUMIRA. This enabled us to offer $0 out of pocket cost for individual members and generated almost $1,000,000,000 of savings for our clients. We are the only company that meaningfully drove biosimilar adoption amongst our clients and will continue to do so with a growing pipeline of additional biosimilars. In our pharmacy businesses, we delivered exceptional experiences with record high levels of MPS in our retail business and PBM retention rates consistently in the high 90s. However, we also recognize that in order to continue improving our customers' experiences, healthcare needs to be more transparent.

So in late twenty twenty three, we took a leadership role to create a pathway for increased transparency and simplicity across the pharmacy marketplace. We address this with the introduction of two important transparent price models. The first is Caremark's true cost model. As a reminder, today we passed through 99% of replays to our clients. When fully implemented, true cost enables patients to see those lower costs at the pharmacy counter, including the full pass through of the rebates we generated from our negotiations with the manufacturers.

True cost continues to resonate in the commercial marketplace and we now have more than 75% of Caremark's commercial members with two or more elements of the model in their pharmacy benefit. The second is CVS Pharmacy's cost advantage. Effective January 1, all of our commercial scripts dispensed through CVS Pharmacy are contracted through our innovative and transparent CVS cost advantage model. Under this new framework, we have tied reimbursement to our acquisition cost and will deliver savings to our payer partners as we continue to relentlessly drive down prices. Our team is now working to deliver a cost based solution for Medicare and Medicaid markets.

These models remove the market basket approach and the unintended consequences that existed in the pharmacy reimbursement, ensuring that patients continue to have access to the most durable and frequent interaction in their healthcare journey. We are also focused on expanding access to high quality care to help address some of the provider shortages facing The U. S. With our healthcare delivery businesses continuing to see meaningful growth. Signify had a record volume year supported by growth in Aetna members, which nearly doubled compared to last year.

We've also seen an accelerated patient growth at Oak Street, supported by our enterprise connections. We continue to expand access to this leading care model and are identifying opportunities to utilize market leading capabilities more broadly across the enterprise. We are advancing technology to reduce frictions that tarnish the experience Americans have when they utilize their benefits and make it difficult to navigate the complex U. S. Healthcare system.

Our updated CVS Health app makes it easier for consumers to manage their health by giving them seamless access to appointments, co pay details and prescription status. We're also leveraging AI to create a more intuitive workflow and faster turnaround times to reduce frustrations for our members and provider partners. While we are working to address the issues across The U. S. Healthcare system, we are also focused on addressing the performance challenges within our own business.

At Aetna, we drove meaningful progress improving and strengthening our operations. We have significant opportunities to unlock embedded earnings that is most pronounced in our Medicare Advantage business. Our focus remains on delivering on our commitments to our Medicare Advantage members while creating a viable path to appropriate margins. In line with our prior commentary, we expect that we will shrink the Medicare Advantage membership by high single digit percentage from year end twenty twenty four. Our deliberate approach to our 2025 Medicare Advantage Bids combined with our improved star ratings will improve margins this year and are part of our ongoing commitment to restore this business to target margins of 3% to 5%.

Last month, CMS released the proposed 2026 Medicare Advantage Advanced Rate Notice. This update does not address the unprecedented utilization trend experienced across the industry over the past two years. Our team is advocating for a more appropriate rate update including adjustments for the industry wide cost trend seen in 2024. We are encouraged by the constructive dialogue with the new administration to help ensure that American seniors will not continue to see significant disruption to their benefits driven by drastic changes to the Medicare Advantage program. Beyond Medicare, we are also encouraged by progress in our other Aetna lines of business.

We are advancing our rate advocacy efforts in Medicaid. We've seen high retention and strong welcome season in our national accounts book and have made meaningful progress in the rightsizing our individual exchange footprint. Every day we work hard to improve the health of all the people we serve. This is always a top priority at CVS Health. While we have made progress addressing some of the frictions that exist in The U.

S. Healthcare system, including leading the industry and increasing transparency and simplicity, we know the healthcare system must be better. Our unique collection of assets and our deep connections with our consumers, members and patients position us to deliver a better and differentiated experience to everyone we serve. We have strong momentum heading into 2025. We have the right assets, the right leadership and the right strategy in place.

Our dedicated employees put our members, patients and consumers at the center of everything we do. We have worked hard to stabilize our Aetna business and have made meaningful progress to address the issues that led to the underperformance in 2024. We are well positioned to be the leader in driving change in the healthcare system. As I hand the call over to Tom, I want to reiterate the importance of delivering on our commitments to our shareholders. We are focused on building trust and establishing credibility as we work hard to deliver on our financial promises in 2025 and beyond.

Thank you, David, and thanks to everyone for joining us this morning. I'll start with a few highlights on total company performance. Fourth quarter revenues of nearly $98,000,000,000 increased more than 4% over the prior year quarter, primarily driven by growth in our Healthcare Benefits and Pharmacy and Consumer Wellness segments. We delivered adjusted operating income of over $2,700,000,000 and adjusted EPS of $1.19 as we saw strong performance across multiple lines of business and favorable prior period reserve development in our Aetna business. Full year cash flow from operations was approximately $9,100,000,000 benefiting from early receipt of cash, particularly in our pharmacy services business.

Turning to our segments. In Healthcare Benefits, we grew revenues to approximately $33,000,000,000 an increase of over 23% over the prior year quarter, reflecting growth in all lines of business. Medical membership of approximately $27,100,000 was roughly flat sequentially as membership in our individual exchange business started to modestly decline in advance of the 2025 rate increases we took in that book. During the quarter, the segment generated an adjusted operating loss of $439,000,000 This result was lower than the prior year quarter, primarily driven by a higher medical benefit ratio, partially offset by the release of the premium deficiency reserve we recorded in the third quarter, higher levels of favorable prior period reserve development and increased net investment income. Our medical benefit ratio of 94.8% increased six thirty basis points from the prior year quarter.

This increase was primarily driven by higher utilization, the premium impact of lower STARS ratings for payment year 2024 and higher acuity and Medicaid, partially offset by a two twenty basis point impact from the already mentioned premium deficiency reserves recorded in the third quarter as well as higher levels of favorable prior period reserve development. While medical trends remained elevated, the experience we observed to date was less severe than the trends we assumed in the downside scenario we discussed last quarter. Importantly, during the quarter, we experienced positive prior period reserve development across all lines of business, primarily related to second and third quarter dates of service. In our Medicare book, continued elevated trend levels were attributable to the same categories we discussed last quarter, including inpatient, outpatient, supplemental benefits and pharmacy. Relative to our downside scenario discussed on the third quarter call, we did see some moderation of inpatient trends, while supplemental benefit costs remain stubbornly high.

We are cautiously optimistic that our benefit design changes in 2025 will help alleviate some of the supplemental benefit structure. In our Medicaid business, acuity remained consistent with the latter part of the third quarter as redeterminations have largely concluded across our state footprint. We continue to work closely with our state partners to align rates with the changes in acuity. During the quarter, we made additional progress on rate updates and with over 40% of our book having it repriced in early January twenty twenty five, we have a line of sight to a mid four percentage point rate increase. Our overall rate advocacy efforts are currently on track.

In our group commercial risk book, fourth quarter trends remained elevated. And similar to others in the industry, we experienced some pressure on our stop loss business, which represents less than 3% of our 2024 premiums. We continue to take a cautious outlook on medical cost trends in this block and combined with lower membership, we expect lower contributions from this business in 2025. Finally, in our individual exchange book of business, we saw continued acceleration of medical cost trends driven by the specialist, inpatient and ambulatory categories. As we discussed on prior calls, we made meaningful price adjustments on our offerings for this product in 2025, which will lead to a significant rationalization of our membership, while also shifting mix towards bronze plans.

Taken together, these actions should improve results in our individual exchange offerings in 2025. Days claims payable at the end of the quarter was forty four days, down zero point six days sequentially, primarily reflective of seasonality. DCP was down one point nine days from the prior year quarter, primarily driven by growth in our Medicare business and the impact of increased pharmacy trends. We remain confident in the adequacy of our reserves. Our Health Services segment generated revenues of approximately $47,000,000,000 during the quarter, a decrease of approximately 4% year over year and 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 our healthcare delivery assets and growth in specialty pharmacy. Fourth quarter adjusted operating income of nearly $1,800,000,000 from a full year result of $7,240,000,000 just shy of the high end of the previous guidance range we reiterated for investors last quarter. On a year over year basis, adjusted operating income decreased 5% from the prior year quarter, primarily driven by continued pharmacy client price improvements, the previously announced loss of a large client and the impact of higher healthcare costs on our healthcare delivery assets that are tied to Medicare, including CVS Accountable Care and Oak Street Health. The decreases were largely offset by improved purchasing economics and increased volume at Signify. Total pharmacy claims processed in the quarter were nearly $500,000,000 and total pharmacy services membership as of the end of the quarter was approximately $90,000,000 We ended the year with another strong quarter of growth in our healthcare delivery business.

As David mentioned, Signify achieved a record volume year completing over 3,000,000 in home health evaluations. This performance contributed to revenue growth in the quarter of approximately 32% as compared to the prior year. We continue to experience strong top line growth at Oaktree supported by our enterprise connections. During the quarter, Oak Street revenue increased approximately 39% over the prior year, driven by patient growth. Total at risk members increased approximately 35% compared to the same quarter last year.

While the Medicare Advantage industry experienced elevated utilization throughout 2024, Oak Street's care model achieved trends lower than the broader industry. Our pharmacy and consumer wellness segment delivered another strong quarter. We generated revenues of over $33,000,000,000 an increase of approximately 7% versus the prior year quarter and over 10% on a same store basis. Adjusted operating income of nearly $1,800,000,000 declined approximately 13% from the prior year quarter, primarily driven by continued pharmacy reimbursement pressure and lower front store volumes, partially offset by improved drug purchases. Results in the fourth quarter were also lower due to a pull forward of immunizations into the third quarter.

Same store pharmacy sales in the quarter increased 13% versus the prior year and same store prescription volumes increased nearly 6%. Same store front store sales were down approximately 1% versus the same quarter last year. We successfully completed our three year store closure plan and are progressing further footprint optimization in 2025. Despite the reduction in our store count, we continue to maintain a retail pharmacy script share position of over 27%. This highlights our strong execution, robust omni channel capabilities and our ability to deliver superior customer experiences while maintaining a deep community presence with 85% of Americans within 10 miles of a CVS location.

Shifting now to cash flow and the balance sheet. We generated cash flows from operations of approximately $9,100,000,000 for the full year. This result was higher than our expectations due to early payments in our pharmacy services business, which will correspondingly lower our expected cash flows in 2025. During the quarter, we returned $838,000,000 to our shareholders through our quarterly dividend, bringing total shareholder dividend payments in 2024 to over $3,300,000,000 We ended the quarter with approximately $3,800,000,000 of cash at the parent and unrestricted subsidiaries. Our leverage ratio at the end of the quarter was approximately 4.7 times, which remains above our long term target.

During the quarter, we executed a liability management transaction that included the issuance of $3,000,000,000 of subordinated debt securities and the retirement of approximately $2,600,000,000 of outstanding debt principal. The net result of these transactions modestly reduced our leverage ratio. We are committed to prudent financial policies, including maintenance of our current dividend as we work to maintain and improve our investment grade rating and expect our leverage to return to more normalized levels as we continue to execute on margin recovery in the Advent business. Shifting now to our outlook for 2025. As David mentioned, we are establishing our initial full year 2025 guidance for adjusted EPS in a range of $5.75 to $6 Consistent with past practice, this range does not assume the recurrence of prior year reserve development, which contributed approximately $0.18 to our 2024 adjusted EPS results.

After excluding the favorable impact of prior year reserve development, our initial 2025 adjusted EPS guidance represents year over year growth of approximately 10% at the low end of the range. We believe this represents an appropriately achievable baseline with opportunities for outperformance. Incorporated across our guidance elements is the initial down payment on our multi year two billion dollars cost efficiency effort. Based on our work to date, we were successful in identifying actions that, at a minimum, will offset the return of certain variable expenses in 2025 as we work to drive further efficiencies across the enterprise over the coming years. Now let's turn to some of the segment details.

I'll start with our Healthcare Benefits segment. We expect aggregate membership to decline by over 1,000,000 members, primarily driven by reductions in our individual exchange and Medicare products. We estimate that membership in our individual exchange block could contract by over 800,000 lives and will have greater visibility when all effectuated members have paid their premiums by the March. We also expect our Medicare Advantage membership to end the year down a high single digit percentage from year end 2024. This is consistent with the guidance we have been giving investors since last summer and reflects strong execution by our teams as they made the difficult choices necessary to improve Medicare Advantage profitability in 2025.

These membership declines are expected to be partially offset by growth in our commercial self insured business. We expect to generate healthcare benefits revenue of approximately $132,000,000,000 as membership declines in Medicare Advantage and individual exchange are offset by Medicare program changes and growth in other products. At the low end of our healthcare benefits adjusted operating income guidance range, we project our medical benefit ratio will improve by 100 basis points over 2024, yielding an MBR of approximately 91.5%. Outperformance on this ratio is one of the largest potential factors that could drive us higher in our adjusted EPS guidance range. The largest driver of the reduction in our medical benefit ratio is projected improvement in our government businesses, particularly in Medicare Advantage.

We also project year over year improvement in our combined commercial lines business, driven by margin recovery and individual exchange, offset by pressures in group commercial from membership declines and elevated levels of medical cost trends. We also expect the contribution from net investment income will decline. Overall, we expect healthcare benefits to deliver adjusted operating income of at least $1,500,000,000 This projection reflects a respectful view of trends in light of the continued elevated medical cost trends that we experienced in the fourth quarter. As a reminder, every point of trend is worth approximately $800,000,000 to Healthcare Benefits adjusted operating income results. Shifting now to our Health Services segment.

We expect revenue of approximately $185,000,000,000 primarily driven by growth at Caremark as we continue to deliver value to our clients. Adjusted operating income for this segment is expected to grow approximately 4% to $7,540,000,000 While our 2025 guidance reflects continued core pharmacy services growth, The overall Health Services segment growth rate is diluted by headwinds in our Healthcare Delivery business. As you know, results in our Healthcare Delivery business are highly correlated to Medicare Advantage medical cost trends and regulations. And at this stage, we have taken a prudent outlook on how these will develop throughout 2025. This initial guidance is consistent with the preview we presented last quarter where we noted that our initial outlook for this segment would be below our long term growth framework, but would prudently reflect opportunities for upside over the course of the year.

We expect healthcare delivery performance to improve starting in 2026 as the current medical cost trends experienced across the industry are more appropriately reflected in rates and planned bids and our continued investments in this business mature. Now for our Pharmacy and Consumer Wellness segment. We project script growth of approximately 3.5 and revenue of approximately $134,000,000,000 We expect adjusted operating income to decline approximately 5% in line with our long term guidance framework of $5,480,000,000 As we have discussed previously, 2025 is its transition year for CVS cost advantage, and we believe the implementation of this model positions us to bend the trajectory of the PCW business over time. We expect interest expense to increase approximately $300,000,000 as we annualize the expense associated with our debt offerings in May and December of twenty twenty four. We project our tax rate to be approximately 25.5%.

We also expect our share count to increase modestly to approximately 1,271,000,000.000 shares and we are not contemplating any share repurchases in 2025. Finally, we expect cash flow from operations to be approximately $6,500,000,000 The operating cash flow decline versus 2024 is primarily driven by late year timing items that were pulled forward into 2024 cash flow as well as the impact of lower risk membership on healthcare costs payable, reserves and risk adjusted revenue accruals, partially offset by improved operating performance in our healthcare benefits business. Over the '24 and twenty twenty five calendar years, we expect that our business will generate operating cash flows of $15,600,000,000 which when combined with improving operating performance will help put us back on the path to our target leverage levels. As you think about the cadence of earnings in 2025, we expect earnings to be more weighted to the first half than the second half, likely a 50 five-forty five split. Seasonal patterns in most of our segments should remain largely unchanged compared to 2024, with the notable exception of our Healthcare Benefits segment, where the Part D changes due to the Inflation Reduction Act and the timing of premium deficiency reserves recorded in 2024 will significantly change the progression of earnings.

You can find additional details on the components of our 2025 guidance on our Investor Relations website. We are encouraged by our opportunities in 2025 and are excited to demonstrate the enormous potential that we see across CVS Health to unlock embedded earnings. We are working tirelessly to restore Aetna to target margins, which over time should represent meaningful upside above the high end of our 2025 guidance range. With that, we will now open the call to your questions. Operator?

Thank you, Tom. We will now begin the question and answer session. We have the first question on the phone line from Lisa Gill with JPMorgan. Please go ahead.

Thanks very much and good morning. David, I wanted to start with you made some comments around your observations in the first one hundred days, but what are some of the things that you think you can really bring to CVS as the new CEO? And anything else that you'd want to share from an investor perspective as you think about the first one hundred days? And then if I can also just maybe better understand the guidance, which is better than I had anticipated, the guidance being a good starting point. Tom made the comment of an opportunity for outperformance.

Last year you gave a better than number. This year you're giving a range $5.75 to $6 Can you maybe just talk about the confidence in that number and the potential outperformance around the guidance for 2025? Thanks very much.

Yes. Thank you, Lisa. And I appreciate the question. Let me give you a little bit of perspective on the first one hundred days and then the things that I believe that we're

focusing on and can deliver into 2025. So as I

mentioned in the first at this point, I'm happy to report, we spent a lot of time on the at this point I'm happy to report, we spent a lot of time focusing on Aetna and we've actually delivered material progress in terms of stabilizing Aetna's operation and also bringing the financial discipline back to the organization. So I think as you look towards the open enrollment as well as the progress made, I'm very confident, very bullish on the continued recovery of that business. I think that the second piece and this speaks to where I've spent the last two years, it's critically important that we continue on this pharmacy transformation journey. We recognize that there are kind of headlines around the role that PBMs and pharmacies play and the fact that we've made significant progress in both changing the pricing models, whether it be on CVS pharmacies cost advantage, which we had 100% adoption in the commercial space or within Caremark's true cost model, which we now have more than 70% of our clients adopting more than two of the features or attributes of that model. These are really important elements I believe that continue to drive change and or transformation in the market.

And the last thing I'll say is that the success that we had in the biosimilar launch with Cordovis was unprecedented. We created what I believe is a durable biosimilar market. We led the market in terms of the volume and the conversion change leading this with both technology and an opportunity to lower cost for our customers. So those are the two big headlines on the business front. And I think as I look at the role that I'm playing is making sure that I'm surrounded with the right leadership.

So this right leadership team, I mentioned Steve Nelson coming in from the outside. He's been on the job now ninety days leading Aetna, both stabilizing that leadership team and the operations and the financial organization. And then we've also announced Prem Shah in a new group president role during the last quarterly earnings. And that's allowed for us to both promote and elevate talent within the organization. So we have Lynn Shankman now running CVS Pharmacy, which is a twenty plus year veteran of the business.

We have Doctor. Sri now running our healthcare delivery assets, which again is a long tenured leader here in our business and then Ed Devaney running CVS Caremark, which is another twenty year veteran of the business. So I think it shows the strength of the leadership team and the bench that we've built in the organization, which was going to continue to allow us, I believe, to lead from the front. So as I look at specifically your question about the role that I'm playing, I believe we have the right assets. I think we've established the right priorities for the business and the right strategy.

And hopefully at this point, we're going to continue to at least in a listening tour, be able to earn the right to become America's leading and most trusted healthcare company. So with that, I'd say my first one hundred days was a leadership transition and now the focus will be a leadership transition becoming a transition to leadership. So let me spend a second talking about the second question on guidance. It is without question important for me to establish both trust and credibility in terms of being able to deliver on the promises and commitments that we've made. So while we're going to talk about the over performance and some of the drivers there, I also want to make sure that we that I'm in a position to make sure that we're delivering on the commitments and promises that we're making to the investment community.

So with that, Tom, if you can share a couple of thoughts on the twenty five year?

the question. And thanks David. We set this out to be an achievable target with opportunities for upside. I think there and hope that there are opportunities across all of our businesses, but the one that I think investors are rightfully most focused on is healthcare benefits. And as you think about that, you think about what I said in the prepared remarks, every point of trend is an 800,000,000 swing on that business.

And we have taken a very prudent outlook on what our medical cost trends are in our forward guidance, specifically because of how 2024 developed. And we have respectfully looked at those trends and our guidance assumes that they persist into 2025. So whether that's in our Medicare business or our group commercial block, as we exited the year in 2024, those trends are consistent with what is in our guidance for 2025. And so I think that would be the place where you could see the most potential upside, would be inside that healthcare benefits business. And this isn't necessarily a 2025 opportunity, but as you think a little bit longer term, the healthcare benefits business, even at the top end of the guidance range, it's a 0.5% of margin compared to 2023, which was over five percent and 2022, which was 7%.

And you look at some of our underlying businesses, government has improved driven by Medicare in particular, but it's still projected to be a negative margin. Group commercial is a profitable business, but is seeing signs of pressure. IFP, our individual exchange product is expected to still lose money in our current outlook. And so if you do the math and you say with the current share count and revenue base, each point of margin improvement is 0.75 of adjusted EPS. And so that implies we could have another $3, 4 dollars more dollars of embedded adjusted EPS if we can get our Aetna business back to its target margins and that's what we're committed to doing over time.

Thank you. We now have Justin Lake with Wolfe Research on the line.

I want to follow-up on some of your comments there, Tom. First on your Medicare Advantage trend, maybe you can give us a little bit more detail there in terms of what did the trend look like coming out of the year for 2024? And specifically, what are you assuming per trend in 2025? I know you said it's kind of you're assuming it to keep that pace. So what was the 2024 trend and the 2025 assumption?

And maybe any detail you could share with us on kind of the cost you take out of the business just via the bids for instance and how you're seeing your membership mix kind of play out for 2025?

Thanks, Justin. Let me answer what I can for you on that. So I noted this in the prepared remarks. So medical trends remained elevated, although what we experienced in the fourth quarter was less severe than what we assumed in our downside scenario. I'd also note, during the quarter, we experienced positive prior period reserve development across all of our lines of business and that was primarily related to the second and third quarter dates of service.

So that was also a nice positive tailwind there. But as you look at the major businesses starting with government, I'd say and maybe specifically Medicare, we saw some modest improvement. It was mostly driven by our group Medicare and our dual lines of business. And specifically, we saw some relief on inpatient earlier in the quarter. Our general enrollment population continued to see elevated trends, but a lot of whether that pressure was actually in the specialist lines.

And we think that that might be more consistent with what we talked about as a rush to care as people looked at some of the changing benefit patterns and their supplemental benefits for 2025. And so we're waiting to see how that's going to play out on those changed benefits in early twenty twenty five. On Medicaid, we did start to see some favorability in that book. Our redeterminations came to a close in our state footprint. And that was the primary driver of year to date trend was those redeterminations.

CVS Health (CVS) Q4 2024 Earnings Call Transcript

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