#Cvs z vibe freeFurther, CVS generated $8.1B of free cash flow, which is 25% higher than 2015. In 2016, CVS grew revenue by 16%, grew EBITDA by 10%, and grew EPS by 13%. Since we don't know when or what the impact of a potential new bill will be, I think investors are unfairly penalizing CVS' stock price. Given the recent failure to pass the replacement bill, it seems that Obamacare may not be replaced or repealed in the near term. President Trump has made appealing Obamacare a top priority - depending on the end result on insured individuals, it may or may not be a negative for CVS. PMBs such as CVS benefit from Obamacare because it means there are more individuals insured. I view the odds that the PBM model is materially impacted by new legislation as unlikely. Further, CVS management claims that PBMs reduce costs to end customers, citing evaluations from the Congressional Budget Office and other recent studies that claim PBMs save customers $6 for every $1 spent on PBM services. is not a government-run healthcare system, PBMs are necessary to facilitate pricing concessions from suppliers and build operating efficiencies into the market. CVS management contends that this is not true, and I tend to agree. There has been some concern, especially given President Trump's rhetoric regarding high drug prices, that the PBM model is driving some of the increase in drug prices. While the loss to Walgreens hurt, my view is it was a special circumstance and not indicative of a systemic problem that will lead to future large losses to Walgreens. CFO Denton claims that the majority of the market is run by a competitive bidding process, implying that this loss to Walgreens, under these circumstances, may be more of a one-time occurrence. My next question on the lost business is whether this is a systemic problem that will continue, or if Walgreens was making a targeted one-time play to gain market share by sacrificing margin. Instead, I think the more likely scenario is that Walgreens provided a massive price cut to steal the business, which for Tricare and Prime to not give CVS a chance to bid, likely means that the price reduction was large and likely not very profitable for Walgreens. I view this as a positive explanation because if CVS were outbid, that would be a concern. On the 3Q16 earnings call, CFO Dave Denton told investors that Tricare and Prime was a complete surprise - there was no competitive bidding process. Losing business to Walgreens is of course a huge concern, but the question is why. While not an insignificant amount of business, the 32mm lost scripts to Walgreens represents less than 2% of CVS's total volume in 2016. 80% of this business was from two contracts, Tricare and Prime Therapeutics, which decided to grant the contract to Walgreens. In 3Q16, CVS announced it lost 40mm of script processing due to "restricted pharmacy networks" - basically signing a contract to get better pricing by reducing pharmacy options. I will argue that this selloff is overblown and positions CVS as a quality company that is attractively valued in widely overvalued market. Over the last 12 months, CVS's share price is down 23%. CVS' size gives it premium negotiating power and scale advantages. With 1.6B claims processed in 2016, it is the largest PBM as Walgreens (NASDAQ: WBA) processed 740mm. CVS is one of the leading Pharmacy Benefit Managers ("PBMs") providing services such as mail-order, prescription plan management, and claims processing. comprised of ~9,700 pharmacies and 1,139 minute clinics. Hudson.CVS Health (NYSE: NYSE: CVS) is the largest pharmacy services provider in the U.S. Additionally, according to The Root, he is listed as president for the Illinois chapter of the Log Cabin Republicans, which are a group who support LGBTQ conservatives.Īll in all, we’re glad justice was served for Ms. Unsurprisingly enough, Matson was a state delegate for Donald Trump’s 2016 presidential campaign. “CVS Health does not tolerate any practices that discriminate against any customer and we are committed to maintaining a welcome and diverse environment in our stores.”ĬVS Statement on Chicago Store Incident /H4h3akdMzs “We have completed our investigation, and as a result, the two colleagues who were involved are no longer employed by CVS Health,” the company stated on Twitter. The incident reportedly happened Friday night (July 13), and by Monday (July 16) CVS had announced that they fired Matson and another colleague for discriminating against Hudson. #Cvs z vibe trialFormer Black Employee Sues Tesla For Racial Abuse, Demands New Trial After Verdict's $122M Reduction
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