Cvs Health Corporation · NYSE:CVS
Cvs Health — Investor Day (December 2015)
43 slides from Cvs Health's investor day presentation, Dec 16, 2015
Slide 1: Driving Enterprise Growth in an Evolving Health Care Market
Driving Enterprise Growth in an Evolving Health Care Market Larry Merlo President & Chi f Executive Chief E ti Officer Offi
Slide 2: Agenda
Agenda Our Compelling Value Proposition Evolving Health Care Market Creates Opportunities Strategic Framework for Long-term Enterprise Growth 2
Slide 3: The Most Extensive Suite of Leading Assets
The Most Extensive Suite of Leading Assets … Retail Mail Long-term Care Retail Specialty Clinics Clinical Infusion Programs g Digital Patients Medical Claims Payors Providers Editing … enabling us to help deliver superior outcomes at a lower cost 3
Slide 4: Continue to Build One-of-a-kind Health Care Company with Unmatched Integrated Assets
Continue to Build One-of-a-kind Health Care Company 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 in fast-growing special
Slide 5: Pharmacy Is Our Focus and We've Captured 39% of Past 5-Year Prescription Growth
Pharmacy Is Our Focus and We’ve Captured 39% of Past 5 5-Year Year Prescription Growth Total U.S. Rx Industry (Rx dispensed, billions) ~710M 5.5 new Rx 4.8 2010 2015E Note: 1. All prescriptions dispensed on a 30-day equivalent basis. Does not include Omnicare. Source: IMS data, CVS Health Internal A
Slide 6: Pharmacy Is Our Focus and We've Captured 39% of Past 5-Year Prescription Growth
Pharmacy Is Our Focus and We’ve Captured 39% of Past 5 5-Year Year Prescription Growth Total U.S. Rx Industry (Rx dispensed, billions) ~710M 5.5 new Rx CVS Health share of 275M market growth 4.8 39% 2010 2015E Gaining share in a growing Rx industry Note: 1. All prescriptions dispensed on a 30-day eq
Slide 7: Prescription Growth Through Enterprise Channels Demonstrates Power of Integrated Model
Prescription Growth Through Enterprise Channels Demonstrates Power of Unique, Integrated Model … CVS/caremark Claims (Rx, millions) ~1,165 1,080 905 Channel agnostic 740 offerings allow us to capture growth in CVS/caremark claims while helping to drive 445 470 client savings 275 365 2008 2011 2014 2
Slide 8: Has Allowed Us to Capture 700 bps of Revenue Share, Equating to $7 Billion
… and Has Allowed Us to Capture 700 bps of Revenue Share, Equating to $7 Billion CVS/caremark Revenue ($, billions) ~100 88 59 700 bps increase 44 = $7 Billion 48% 50% 53% 55% 2008 2011 2014 2015E CVS Health share All other Our outperformance in specialty is a key driver of revenue share gains Notes
Slide 9: Agenda
Agenda Our Compelling Value Proposition Evolving Health Care Market Creates Opportunities Strategic Framework for Long-term Enterprise Growth 9
Slide 10: Evolving Health Care Market Creates Opportunities
Evolving Health Care Market Creates Opportunities Demographics and Health Reform Continue 1 to Transform the Market Specialty Growth Will Be Primary Driver 2 of Pharmacy Trend 3 Retailization of Health Care Is Accelerating 4 Increasing Focus on Outcomes 5 Consolidation in the Health Plan Market 10
Slide 11: Health Reform and Demographics Expanding Insured Population
Health Reform and Demographics Expanding 1 Insured Population Growth in U.S. Insured Lives (lives, millions) 306 286 Individuals/Exchanges 35 264 19 14 63 65 Medicaid 53 49 53 62 Medicare 148 151 143 Employer-sponsored 2013 2015E 2019E Medicare and Exchanges will be primary drivers Source: CVS Healt
Slide 12: Aging U.S. Population Will Drive Prescription Utilization
Aging U.S. Population Will Drive Prescription 1 Utilization … U.S. Population Aged 65+ Retail Prescription Utilization (lives, millions) by y Age g Group p (Rx per member per year) +18M lives 65.9 65+ 36.6 56.4 47.8 19-64 16.2 0-18 4.1 2015E 2020E 2025E Sources: 1. U.S. Census Bureau. 2. Utilization
Slide 13: and Fuel Growth in Prescription Expenditures
… and Fuel Growth in Prescription Expenditures 1 U.S. Prescription Drug Expenditures ($, billions) 6.2% 564 CAGR 464 385 328 2015E 2018E 2021E 2024E Source: CMS, Office of the Actuary, Prescription Drug Expenditures (figures as of July 30, 2015). 13
Slide 14: Pharmacy Is One of the Most Cost-efficient Ways to Manage Health Care Costs
Pharmacy Is One of the Most Cost-efficient 1 Ways to Manage Overall Health Care Costs Healthcare Savings from Improved Adherence (PMPY) Hyperlipidemia Diabetes Hypertension ROI $5,883 ROI $5,676 9X 9X ROI $3,311 5.5X ($601) ($656) ($629) Added Rx spend Medical and productivity savings Source: Roebuc
Slide 15: CVS Health Can More Broadly Reach Patients Across the Continuum of Care
CVS Health Can More Broadly Reach Patients 1 Across the Continuum of Care Standalone Standalone CVS Health Retailer PBM Retail pharmacy Mail Order Specialty/Infusion LTC pharmacy Retail clinics Clinical programs Channel connectivity 15
Slide 16: Growth in U.S. Population Over 85 Underscores Need for Long-term Care
Growth in U.S. Population Over 85 Underscores 1 Need for Long-term Long term Care U.S. Population Aged 85+ Omnicare is a leading pharmacy (lives, millions) services provider to LTC facilities • Nationwide footprint with leading ~2X positions in Assisted Living and Skilled 11.9 Nursingg facilities •
Slide 17: Evolving Health Care Market Creates Opportunities
Evolving Health Care Market Creates Opportunities Demographics and Health Reform Continue 1 to Transform the Market Specialty Growth Will Be Primary Driver 2 of Pharmacy Trend 3 Retailization of Health Care Is Accelerating 4 Increasing Focus on Outcomes 5 Consolidation in the Health Plan Market 17
Slide 18: Specialty Growth Will Be Primary Driver of Pharmacy Trend
Specialty Growth Will Be Primary Driver of 2 Pharmacy Trend Addressable Specialty Industry ($, billions) 14% 220 CAGR 130 65 2012 2016E 2020E Note: 1. Addressable specialty industry currently excludes infused oncology. Source: NHE, Artemetrx, CVS Health Internal Analysis, 2015. 18
Slide 19: Largest and Fastest-growing Specialty Pharmacy in the U.S.
We Are Well-positioned as the Largest and 2 Fastest-growing Fastest growing Specialty Pharmacy in the U.S. … CVS Health Specialty Revenue ($, billions) 49 27% CAGR 40 30 22 19 2012 2013 2014 2015E 2016E Dispensed Managed ACS (Omnicare) . Source: CVS Health Internal Analysis. Does not include special
Slide 20: Broadest Capabilities to Manage Trend and Improve Care
… with the Broadest Capabilities to Manage 2 Trend and Improve Care Formulary • Formulary strategies offer drug exclusions, step therapy Solutions and new-to-market control Network • Exclusive Choice network can help reduce trend and Design drive incremental savings Utilization • Cost-effective, cli
Slide 21: Evolving Health Care Market Creates Opportunities
Evolving Health Care Market Creates Opportunities Demographics and Health Reform Continue 1 to Transform the Market Specialty Growth Will Be Primary Driver 2 of Pharmacy Trend 3 Retailization of Health Care Is Accelerating 4 Increasing Focus on Outcomes 5 Consolidation in the Health Plan Market 21
Slide 22: Retailization of Health Care Continues with Growth in Consumer-directed Health Plans
Retailization of Health Care Continues with 3 Growth in Consumer Consumer-directed directed Health Plans CDHP Enrollment Drivers of Trend (lives, millions) • Employers looking to CDHPs 37.5 to help control mounting health 25% care costs CAGR 30 5 30.5 − Employees have accountability in their health
Slide 23: Promoting Healthy Behavior Is Critical in Avoiding Unintended Consequences with CDHPs
Promoting Healthy Behavior Is Critical in 3 Avoiding Unintended Consequences with CDHPs As Patient Cost Share Rises… CVS Health Advantages More than 9,500 convenient locations … sustaining adherence Cost becomes more challenging CVS/minuteclinic Innovative plan design … patients may choose to
Slide 24: Example: Reduced Co-pay for Key Maintenance Medications Improves Adherence in CDHPs
Example: Reduced Co-pay for Key Maintenance 3 Medications Improves Adherence in CDHPs Member Adherence to Prescribed Hyperlipidemia Medication Initiators Continuers +130 bps 80% 82% +560 bps 63% 57% Without preventative drug list With preventative drug list Notes: 1 Initiators defined as patients st
Slide 25: Evolving Health Care Market Creates Opportunities
Evolving Health Care Market Creates Opportunities Demographics and Health Reform Continue 1 to Transform the Market Specialty Growth Will Be Primary Driver 2 of Pharmacy Trend 3 Retailization of Health Care Is Accelerating 4 Increasing Focus on Outcomes 5 Consolidation in the Health Plan Market 25
Slide 26: Payment Models Continue to Evolve Away from Fee-for-service
Payment Models Continue to Evolve Away from 4 Fee-for-service Fee for service and Towards Value Value-based based Payments Medicare Reimbursement by Payment Model 33% 52% 34% 18% Two-thirds in alternative 30% 33% models 2015E 2018E Medicare Advantage Value-based FFS Volume-based FFS By 2018, two-thi
Slide 27: Public and Private Payors Taking Steps to Managing Outcomes and Total Cost of Care
Public and Private Payors Taking Steps to 4 Managing Outcomes and Total Cost of Care Largest health systems Medicare pledge to move mandatory bundles 75% of business into for hips/knees value-based arrangements 2016 2017 2020 Medicare Part D Enhanced MTM model Sources: 1. HHS, CMS finalizes bundled
Slide 28: CVS Health Can Support Health Systems Across the Payment Continuum
CVS Health Can Support Health Systems Across 4 the Payment Continuum Sacramento, Birmingham, AL Evolving Contracting Arrangements CA Fee for FFS with Bundled Shared Shared Global Service Pay for Payments Savings Risk Capitation (FFS) Performance 28
Slide 29: Full Range of Tools and Services to Support Differentiated Needs of Providers
Full Range of Tools and Services to Support 4 Differentiated Needs of Providers Health Hospital CVS/minuteclinic Epic EMR Engagement Transitions Engine Complementary health Enhanced connectivity Powerful analytics Assisting patients to care services to the health care capabilities avoid adherence sy
Slide 30: CVS Health Best-in-class Tools to Drive Adherence
CVS Health Best-in-class Tools to Drive Adherence 4 Medication Possession Ratio Diabetes Di b t Cholesterol Ch l t l Hypertension H t i Therapy Therapy Therapy +650 +580 83 bps 84 bps +700 bps 80 78 77 73 Top 3 CVS/ Top 3 CVS/ Top 3 CVS/ Retail pharmacy Retail pharmacy Retail pharmacy Adherence for
Slide 31: CVS Health Can Directly Impact a Significant Portion of Star Metrics
Largest CVS Health MedCan D PDP Directly to Achieve Impactaa4-Star Significant Rating 4 Portion for the 2016 of Star Plan Metrics, Year Driving Outperformance Largest PDPs by Enrollment (lives, millions) Star Rating OptumRx 5.4 3.0 CVS Health 45 4.5 40 4.0 Humana 4.4 3.5 Express Scripts 28 2.8 40 4.
Slide 32: CVS Health Can Directly Impact a Significant Portion of Star Metrics, Driving Outperformance
CVS Health Can Directly Impact a Significant 4 Portion of Star Metrics, Driving Outperformance Largest PDPs by Enrollment SilverScript is excelling… (lives, millions) Star • O Only l PDP with ith >50% 50% llow- Rating income-subsidy lives to OptumRx 5.4 3.0 achieve 4 Star rating CVS Health 45 4.5 40
Slide 33: Evolving Health Care Market Creates Opportunities
Evolving Health Care Market Creates Opportunities Demographics and Health Reform Continue 1 to Transform the Market Specialty Growth Will Be Primary Driver 2 of Pharmacy Trend 3 Retailization of Health Care Is Accelerating 4 Increasing Focus on Outcomes 5 Consolidation in the Health Plan Market 33
Slide 34: We Can Partner with Health Plans in a Multitude of Ways to Drive Value
We Can Partner with Health Plans in a Multitude 5 of Ways to Drive Value Strong Broad service Pharmacy y is Unique q abilityy procurement portfolio to our focus and a to leverage capabilities and support plan key lever for consumer claims scale needs whether managing insights makes or not we are ove
Slide 35: After Consolidation, Regional and Blues Plans Will Still Manage More Than Half of Total Lives
After Consolidation, Regional and Blues Plans 5 Will Still Manage More Than Half of Total Lives Humana Aetna Aetna Cigna Anthem Anthem Nationals 46% United United Regionals 54% Blues Market Today Future Market 35
Slide 36: We Dispense 8X to 11X the Prescription Volume of the Proposed Combinations
We Dispense 8X to 11X the Prescription 5 Volume of the Proposed Combinations … 2015 Estimated Rx Volume (Rx dispensed, millions) CVS Health Advantages • Generic purchasing scale makes 1,350 us a low-cost provider • Scale is further enhanced by Red Oak sourcing ~8X ~11X 170 120 CVS Aetna Anthem Healt
Slide 37: We Manage 2X to 3X the Claims Volume of the Proposed Combinations
… and We Manage 2X to 3X the Claims 5 Volume of the Proposed Combinations 2015 Estimated Claims Volume CVS Health Advantages (Rx managed, millions) • Substantial managed claims volume supports negotiations for 1,165 rebates / formulary placement ~2X 2X ~3X • Creates value as majority of rebates are
Slide 38: We Dispense 8X to 11X and Manage 2X to 3X the Volumes of the Proposed Combinations
We Dispense 8X to 11X and Manage 2X to 3X the 5 Volumes of the Proposed Combinations 2015 Estimated Rx Volume 2015 Estimated Claims Volume (Rx dispensed, millions) (Rx managed, millions) 1,350 1,165 ~2X 2X ~3X ~8X ~11X 600 480 170 120 CVS Aetna Anthem CVS / Aetna Anthem Health Humana Cigna caremark
Slide 39: Agenda
Agenda Our Compelling Value Proposition Evolving Health Care Market Creates Opportunities Strategic Framework for Long-term Enterprise Growth 39
Slide 40: Our Strategic Business Imperatives
Our Strategic Business Imperatives Aggregate Grow Execute with Drive Enterprise Lives Share Excellence Innovation Focus Grow the core, Broaden the base 40
Slide 41: Our Strategy for Long-term Enterprise Growth
Our Strategy for Long-term Enterprise Growth 5 4 Opportunistic bolt-on acquisitions Continued innovation in drug procurement and 3 supply chain efficiencies 2 Enhance patient engagement Deepen relationships with payors and providers 1 to help reduce cost and improve outcomes Add capabilities p to en
Slide 42: The Right Strategy for an Evolving Health Care Market
Today’s Key Takeaways The Right Strategy for an Evolving Health Care Market Demonstrating Value Leadership in multiple competencies to drive superior to People, Payors and Providers value l ffor health h lth care partners t Growing g the Core,, Expanding p g core p pharmacyy business while broadenin
Slide 43: Endnote
Endnote 1. , Omnicare, CVS/caremark, CVS/pharmacy, CVS Health, CVS/specialty, CVS/minuteclinic, and Health Engagement Engine are trademarks or registered trademarks of CVS Pharmacy, Inc. 43