Cvs Health Corporation · NYSE:CVS
Cvs Health — Investor Day (December 2016)
52 slides from Cvs Health's investor day presentation, Dec 15, 2016
Slide 1: Meeting the Health Care Challenges of Tomorrow
Meeting the Health Care Challenges of Tomorrow Jon Roberts Executive Vice President & President, CVS Caremark
Slide 2: Agenda
Agenda PBMs: Needed Now More Than Ever Performance Highlights How We Address Payors’ #1 Priority: Reducing Cost Integrated Where It Matters Innovating for the Future 2
Slide 3: Challenged by Evolving Market Dynamics, Payors Look for More From a PBM
Challenged by Evolving Market Dynamics, Payors Look for More From a PBM Rising Drug Increasing Movement to Evolving Role Costs Consumerism Value-Based Care of Government Drug price inflation Higher cost share Incentives for Growing enrollment and high launch for consumers quality driving in governme
Slide 4: The Most Extensive Suite of Leading Assets
The Most Extensive Suite of Leading Assets… Cost Retail Management Long-Term Tools Mail Care Retail Clinics Specialty Clinical Programs Infusion Patients Medical Digital Claims Payors Providers Editing …enabling us to deliver superior outcomes at a lower cost 4
Slide 5: Our Integrated Model Positions Us as the PBM of Choice
Our Integrated Model Positions Us as the PBM of Choice Integrated PBM / Standalone Health Plan PBM Purchasing Scale Actionable Clinical Information Integrated Where It Matters Consumer Touchpoints 5
Slide 6: Agenda
Agenda PBMs: Needed Now More Than Ever Performance Highlights How We Address Payors’ #1 Priority: Reducing Cost Integrated Where It Matters Innovating for the Future 6
Slide 7: Continued Strong PBM Performance
Continued Strong PBM Performance Net Revenue Operating Profit ($, billions) ($, billions) 14.7% 12.1% CAGR CAGR 132 4.9 120 4.6 100 4.0 88 3.5 76 3.1 2013 2014 2015 2016E 2017E 2013 2014 2015 2016E 2017E Refer to endnotes for additional information. 7
Slide 8: 2017: Another Outstanding Selling Season
2017: Another Outstanding Selling Season LEADING THE MARKET IN SALES CVS Health CVS Health won achieved >50% ~97% of revenue client from clients retention changing PBMs Refer to endnotes for additional information. 8
Slide 9: 2017: Another Outstanding Selling Season
2017: Another Outstanding Selling Season Employer $7.8 Billion Health Plan $1.4 Government & Union $1.3 $5.1 Sales (billions) Net new business of $4.3 billion Refer to endnotes for additional information. 9
Slide 10: New Business Provides Platform to Grow Enterprise Dispensing
New Business Provides Platform to Grow Enterprise Dispensing Enterprise Rx Volume (Rx dispensed, millions) 29.1 29.9 26.7 Last 3 Years +20.7 +14.2 +7.3 19.4 New business $31B 15.7 Rxs for 8.4 enterprise 42M Class of 2015 Class of 2016 Class of 2017 Pre PBM Projected 2017 The longer we serve a client
Slide 11: Our Record of Success in Building Prescription Volume With Health Plans
Our Record of Success in Building Prescription Volume With Health Plans New Health Plan Client Multi-Year Health Plan Client Enterprise Rx Volume Enterprise Rx Volume (Rx dispensed, millions) (Rx dispensed, millions) 18.0 5.3 +6.9 +6.9 4.6 4.4 +3.5 11.3 11.1 +3.4 6.7 7.8 3.3 Medicaid Medicare D Tota
Slide 12: Leading in Medicare by Delivering Service and Quality
Leading in Medicare by Delivering Service and Quality Star % of Lives in Largest PDPs by Enrollment Rating Medicare Lives Served by PBMs 4 or 5 Star Plan (lives, millions) (lives, millions) United Healthcare 12.3 46% CVS Health SilverScript 5.6 4 CVS Caremark 12.0 80% Humana Insurance Company 4.7 3
Slide 13: Helping Our Health Plan Clients Grow Their Medicare Business
Helping Our Health Plan Clients Grow Their Medicare Business 7.6% CAGR 2013-2016 4.8% CAGR 2013-2016 CMS-REPORTED GROWTH OF PLANS TOTAL MARKET ADMINISTERED BY GROWTH Refer to endnotes for additional information. 13
Slide 14: Specialty Growth Continues to Outpace the Market
Specialty Growth Continues to Outpace the Market CVS Specialty Dispensed Revenue ($, billions) 37 29% CVS Specialty 32 CAGR 27 20 19% 14 Industry CAGR 2013 2014 2015 2016E 2017E Refer to endnotes for additional information. 14
Slide 15: Delivering High Levels of Client and Member Service
Delivering High Levels of Client and Member Service Continuously – Top 2 Box Satisfaction Scores 96% 2016 Client Satisfaction 2016 Member Satisfaction 94% Client and member Tracking performance to drive Client and member online surveys continuous improvement call analytics 9.1 million members across
Slide 16: Agenda
Agenda PBMs: Needed Now More Than Ever Performance Highlights How We Address Payors’ #1 Priority: Reducing Cost Integrated Where It Matters Innovating for the Future 16
Slide 17: Despite Market Forces, We Helped Our Clients Cut Trend
Despite Market Forces, We Helped Our Clients Cut Trend TREND CONTRIBUTORS JAN-SEP 2016 11.8% 2.3% -2.1% 0.5% Intelligent 9.0% Purchasing Surveillance & Management Cost Management -6.4% 3.3% JAN-SEP 2016 BRAND GENERIC UTILIZATION HEPATITIS C PBM JAN-SEP 2016 UNMANAGED TREND INFLATION INFLATION
Slide 18: Brand Price Inflation Drives Trend
Brand Price Inflation Drives Trend Average Wholesale Price (AWP) Inflation 14.4% 14.9% 13.4% 12.8% 12.5% 3.8% 2.7% 2.6% 2.9% 2.2% 2012 2013 2014 2015 Jan-Sep 2016 Brand Generic Refer to endnotes for additional information. 18
Slide 19: Brand Price Inflation Drives Trend
Brand Price Inflation Drives Trend Average Wholesale Price (AWP) Inflation 14.4% 14.9% 13.4% BRAND 12.8% 12.5% INFLATION ADDED $21.1B 3.8% GENERIC 2.7% 2.6% 2.9% INFLATION 2.2% ADDED 2012 2013 2014 $1.9B Jan-Sep 2016 2015 Brand Generic Refer to endnotes for additional information. 19
Slide 20: Higher Launch Prices Contribute to Rising Specialty Spend
Higher Launch Prices Contribute to Rising Specialty Spend Annual Price ($, thousands) 200 160 120 80 40 0 1997 1998 2002 2004 2006 2007 2008 2011 2013 2013 2014 2014 2015 2016 Refer to endnotes for additional information. 20
Slide 21: Aging Population, New Drugs Lead to Increased Utilization in Specialty
Aging Population, New Drugs Lead to Increased Utilization in Specialty Aging Population New Drugs Utilization Trend Rx per million plan members per month 9,226 6,621 10,000 Americans > 200 new drugs will turn 65 every expected to launch day until 2030 between 2016-2018 2011 2012 2013 2014 2015 By 20
Slide 22: Winning With Payors: Our Differentiated Three-Pronged Approach to Reducing Costs
Winning With Payors: Our Differentiated Three- Pronged Approach to Reducing Costs Real-time Versatile Intelligent surveillance and cost management purchasing dynamic management strategies Differentiated approach to helping Thoughtful and Identify trend Provide flexibility deliver lowest strategic dr
Slide 23: Intelligent Purchasing: Foundational to Helping Deliver Lowest Net Cost
INTELLIGENT PURCHASING Intelligent Purchasing: Foundational to Helping Deliver Lowest Net Cost Strategic Assessment Actions Right Negotiate from Pipeline Market Competition opportunities strength Unmatched Negotiation Capabilities Low-cost generics through Brand inflation addressed Significant reduc
Slide 24: Intelligent Purchasing Dramatically Reduces Impact of Utilization and Drug Price Inflation
INTELLIGENT PURCHASING Intelligent Purchasing Dramatically Reduces Impact of Utilization and Drug Price Inflation Unmanaged Inflation and 14.2% Utilization Impact 11.8% 12.4% 11.8% Post-Rebate Trend 5.0% 3.3% 2014 2015 2016 (Jan – Sep) Refer to endnotes for additional information. 24
Slide 25: Real-Time Surveillance & Dynamic Management: Interactive RxInsights
REAL-TIME SURVEILLANCE Real-Time Surveillance & Dynamic Management: to Stay Ahead of Market Volatility Interactive RxInsights® 25
Slide 26: Real-Time Surveillance & Dynamic Management
REAL-TIME SURVEILLANCE Real-Time Surveillance & Dynamic Management: to Stay Ahead of Market Volatility Aims to mitigate Ensure thorough impact of manufacturer new-to-market price increase assessment Price Increases Drug Pipeline Utilization Increases Fraud, Waste & Abuse Identify increases at Audit
Slide 27: Case Study: Dynamic Management Solution Cut Lidocaine Spend Dramatically in Weeks
REAL-TIME SURVEILLANCE Case Study: Dynamic Management Solution Cut Lidocaine Spend Dramatically in Weeks Spend Per Member Per Month ($) 1.88 Solution 1.64 Implemented 1.46 1.50 1.15 Developed Trend solutions Identified Client evaluation of options 0.21 0.01 0.01 0.00 January February March April May
Slide 28: Core Safety and Monitoring Programs Save Clients $100 Million
REAL-TIME SURVEILLANCE Core Safety and Monitoring Programs Save Clients $100 Million How the PBM Fights Prescription Drug Abuse $100 Million Savings $74M Claims review to identify System Intervene $26M suspect behavior – + generates risk score, which + directly with prescriber and + Collaborate with
Slide 29: Versatile Cost Management Strategies Address Client Priorities
VERSATILE COST MANAGEMENT Versatile Cost Management Strategies Address Client Priorities Across All Lines of Business up to Network Optimization – incremental savings 4% savings up to Targeted Strategies – to identify specific trend drivers 13% savings up to Foundational Approaches – promote utiliza
Slide 30: Continuing to Lead the Market in Formulary Innovation
VERSATILE COST MANAGEMENT Continuing to Lead the Market in Formulary Innovation 2012 Formulary Removals Client-Managed Our $107.30 managed formulary Standard 2015 New-To-Market Evaluations options help $89.74 drive lower Advanced Control PMPM costs $87.44 2016 Specialty Class Review Value $80.51 Bio
Slide 31: Product Adoption and Runway
VERSATILE COST MANAGEMENT Product Adoption and Runway Total Lives Current Lives Savings Opportunity MAINTENANCE CHOICE 25 million 46 million Up to 4% TOTAL NETWORK STRATEGIES 37 million 86 million Up to 4% FORMULARY STRATEGIES 27 million 55 million Up to 8% EXCLUSIVE SPECIALTY 41 million 60 million
Slide 32: In Rapidly Evolving Market, Cost Management Demands More From a PBM
In Rapidly Evolving Market, Cost Management Demands More From a PBM Intelligent Real-time surveillance and Versatile cost purchasing dynamic management management strategies DIFFERENTIATED APPROACH TO HELPING DELIVER LOWEST NET COST 32
Slide 33: Agenda
Agenda PBMs: Needed Now More Than Ever Performance Highlights How We Address Payors’ #1 Priority: Reducing Cost Integrated Where It Matters Innovating for the Future 33
Slide 34: The Complex Challenges of Population Health
The Complex Challenges of Population Health Managing specialty 3 out of 4 Managing her own and SENIORS HAVE TWO OR her family’s health conditions MORE CHRONIC CONDITIONS 5% Managing diabetes and $300 Billion OF POPULATION ACCOUNTS high blood pressure ANNUAL COST OF FOR MORE THAN ONE-THIRD NON-ADHERE
Slide 35: Integrated Where It Matters: Health Engagement Engine Transforms Data Into Actionable Interventions
Integrated Where It Matters: Health Engagement Engine Transforms Data Into Actionable Interventions HEALTH ENGAGEMENT ENGINE CVS Health Pharmacy Pharmacy Provider Research claims from customer plan members Institute Nurse Hospital Insights data Pharmacist Health Plan Medical claims Registered from h
Slide 36: Meet Sarah
Meet Sarah Specialty Connect HEALTH ENGAGEMENT ENGINE ScriptSync Pharmacy EHR claims Data Specialty CareTeam Medical claims 43 years old, from health plan multiple sclerosis Pre-diabetic Relies on support from her Pharmacy MinuteClinic Digital Tools CareTeam, struggling to customer visit data
Slide 37: Our Unique Model and Capabilities Deliver Better Clinical Results
Our Unique Model and Capabilities Deliver Better Clinical Results Wellness and Adherence Addressing Specialty Transitions Preventative Support Gaps in Care Patient Support in Care Care 34% 9.9% 7.5% 23% 48% Higher vaccination rate Adherence increase Reduction in gaps in Fewer hospitalizations Reduct
Slide 38: Agenda
Agenda PBMs: Needed Now More Than Ever Performance Highlights How We Address Payors’ #1 Priority: Reducing Cost Integrated Where It Matters Innovating for the Future 38
Slide 39: We Continue to Innovate to Anticipate and Address Unmet Needs for Clients and Members
We Continue to Innovate to Anticipate and Address Unmet Needs for Clients and Members AFFORDABLE Value Price Formulary Protection Dynamic Trend Value-Based Manager Contracting Formulary Advanced Control Exclusions Formulary™ EHR Pharmacy EFFECTIVE Health Advisor 2.0 System Connectivity Affiliations
Slide 40: Value-Based Contracting With Pharma Manufacturers
Value-Based Contracting With Pharma Manufacturers Principles Of Further aligns incentives on outcomes and cost Value-Based Contracting Price linked explicitly to the defined value metrics Indication-Based Indication-Based Outcomes-Based Rebates Pricing Contracting • A differentiated rebate structu
Slide 41: Value-Based Retail Networks Help Deliver Savings and Improved Performance
Value-Based Retail Networks Help Deliver Savings and Improved Performance Network Composition • Value-based networks up to ~50,000 pharmacies • Stringent performance criteria Network Design • Provide a high level of member access • Pay-for-performance component Performance Metrics • Adherence in spe
Slide 42: Staggering Cost of Diabetes
Staggering Cost of Diabetes By the Numbers A Challenging Care Plan 1 in 3 Medication therapies Monitoring of blood glucose Members will be diagnosed with diabetes in their lifetime levels multiple times per day Ongoing provider follow-ups and exams $10K Regular A1c checks Higher annual medic
Slide 43: Transform Care Programs Improve Clinical Outcomes and Reduce Costs
Transform Care™ Programs Improve Clinical Outcomes and Reduce Costs Stratify Employ advanced analytics to segment the population by disease complexity • Personalized outreach based Target on robust member targeting • Delivered exclusively through CVS-Only Diabetes Network IMPROVING OUTCOMES CONTROLL
Slide 44: CVS Health Transform Diabetes Care in Action
CVS Health Transform Diabetes Care™ in Action Counseled. Connected. Monitored. Supported. Paul Newly prescribed antidiabetic medication Transform Paul’s Care Journey to Effective Diabetes Control Diabetes Management Savings for client with 100,000 lives: up to $36 million per year Refer to endnotes
Slide 45: Expanding Member Options—Maintenance Choice 3.0
Expanding Member Options—Maintenance Choice 3.0 FILL AT HOME DELIVERY CVS BY MAIL SAME-DAY HOME DELIVERY The next generation of prescription convenience— Only for CVS Caremark Members 45
Slide 46: Helping Each Member Along Their Path to Better Health
Helping Each Member Along Their Path to Better Health BILL RICK SUSAN LOIS 65 years old 51 years old 37 years old 58 years old COPD Diabetes High cholesterol Multiple Sclerosis Does not live near CVS High blood pressure 3 children; manages her Connects digitally family’s prescription
Slide 47: Today’s Key Takeaways
Today’s Key Takeaways Driving More Affordable, Accessible and Effective Care Driving Outcomes Evolving market demands more from a PBM; next-generation and Savings pharmacy management essential for payors, members and providers Providing the Front Delivering better outcomes by supporting members thro
Slide 48: Endnotes
Endnotes Slide 7 1. 2016E & 2017E values represent the midpoint of the guidance ranges. Slide 8 1. Revenue from clients changing PBMs: CVS Health internal data analysis. 2. Client retention rate: 1 less (estimated 2017 lost revenues from any known terminations plus annualization of any mid- year 201
Slide 49: Endnotes
Endnotes Slide 12 1. Largest PDPs by enrollment: Reflects the estimated Captive/non-Captive lives by PBM for 2016 plan year. Membership based on October 2016 Medicare Part D CMS enrollment and estimation of current contracts under PBM management. PBM – health plan client relationship is sourced from
Slide 50: Endnotes
Endnotes Slide 17 1. Source: CVS Health internal data analysis, utilization trend based on commercial cohort (Health Plans and Employers). 2. Trend is reported net of rebates. Slide 18, 19 1. Source: CVS Health internal data analysis, client cohort excludes SilverScript PDP and EGWP clients. Slide 2
Slide 51: Endnotes
Endnotes Slide 29 1. Savings results will vary based on a variety of factors including demographics, plan design and other programs implemented by the client. Slide 30 1. Source: CVS Health internal data analysis, 2016. All cohorts used for analysis are age-adjusted to commercial means. The Client-M
Slide 52: Endnotes
Endnotes Slide 37 1. Wellness and Preventative: CVS Health internal data analysis 2015. 2. Adherence Support: Increase based on oral diabetes medications. 3. Addressing Gaps in Care: CVS Health internal data analysis, 2013 data. 4. Specialty Patient Support : CVS Health internal data analysis, 2013