Cvs Health Corporation · NYSE:CVS
Cvs Health — Investor Day (June 2019)
174 slides from Cvs Health's investor day presentation, Jun 4, 2019
Slide 1: Creating Value by Transforming the Consumer Health Experience
Creating Value by Transforming the Consumer Health Experience Larry Merlo President & Chief Executive Officer
Slide 2: Cautionary statement regarding forward-looking statements
Cautionary statement regarding forward-looking statements The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of CVS Health Corporation. By their nature, all forward-looking statements involve risks and uncertainties. Actual
Slide 3: Today's Objectives
Today’s Objectives Strength of our businesses and how they provide a foundation for transformation How we intend to dramatically improve the way health care is delivered in the U.S. Our expectations for 2020 / 2021 and our positioning for long-term growth How current investments will translate into
Slide 4: Agenda
Agenda Key trends in health care Well positioned to drive change Enterprise priorities to accelerate growth 4
Slide 5: As health care challenges mount, the call for change grows louder
As health care challenges mount, the call for change grows louder 5
Slide 6: Trends driving change in the health care landscape
Trends driving change in the health care landscape Empowered Migration Changing Evolution of Evolving health care from sick care perspectives personalized payment consumer to self care on aging care models 6
Slide 7: Agenda
Agenda Key trends in health care Well positioned to drive change Enterprise priorities to accelerate growth 7
Slide 8: Creating the most consumer-centric health company
Creating the most consumer-centric health company Powerful health Owner economics Recognized and Deep local footprint care decision- enable broader ability trusted brand, of consumer-facing making engine to deliver value supported by large assets including informed by data across enterprise workforc
Slide 9: Unmatched ability to engage with consumers
Unmatched ability to engage with consumers – CVS Health interacts with one in three Americans annually In the community In the home In the palm of their hand visits1 ~70% of U.S. population lives within three miles of a 700K annually 72M patients enrolled in text messaging CVS Pharmacy program 9
Slide 10: We are uniquely positioned among managed care peers
We are uniquely positioned among managed care peers Competitor Competitor Competitor 1 2 3 Medical benefits Pharmacy benefits Specialty pharmacy Retail pharmacy Unmatched local consumer Retail clinics touchpoints Other providers/services 10
Slide 11: Agenda
Agenda Key trends in health care Well positioned to drive change Enterprise priorities to accelerate growth 11
Slide 12: Enterprise priorities to accelerate growth
1. 2. Grow and Deliver Enterprise priorities to differentiate our transformational businesses products and services accelerate growth Consumer obsessed – be local, make it simple, improve health 3. 4. Create a consumer- Modernize enterprise centric technology functions and infrastructure capabilitie
Slide 13: Grow and differentiate our businesses
PRIORITY #1 Grow and differentiate our businesses Deliver new Drive and innovative Introduce Win in Improve engagement benefit designs, integrated high-growth productivity through reimbursement products market and efficiency personalization models, and and services segments store formats 13
Slide 14: HealthHUBs: Positive Results Fuel Broader Expansion
HealthHUBs®: Positive Results Fuel Broader Expansion By the end Expanding to of 2019 4 markets By the end Expecting to open of 2021 1,500 locations 14
Slide 15: Products & Services Value Creation
PRIORITY #2 Transformation provides multiple growth opportunities Products & Value Creation Operating Income Services Expectations 2 Medical cost savings Comprehensive chronic care and disease management Membership ~ $850 million growth in 2022 New consumer facing products Expanded use of Optimize g
Slide 16: Creating a consumer-centric technology infrastructure
PRIORITY #3 Creating a consumer-centric technology infrastructure Seamless, connected digital Turning data into and physical insights and experiences insights into action Consumer-centric Simplify the experience Improve outcomes Drive efficiency An intelligent engagement platform 16
Slide 17: Integration and modernization expected to deliver significant savings
PRIORITY #4 Integration and Integration Enterprise synergies modernization modernization • Business integration • Technology expected to • General and enhancements deliver administrative functions • Productivity improvements significant • Medical cost savings savings On track to deliver savings of T
Slide 18: Enterprise priorities create path to accelerate growth
Enterprise priorities create path to accelerate growth 2022+ Low double digits 2021 Mid single digits 2020 Low single Projected Adjusted EPS growth (%)2,3 2019 digits $6.75 to $6.90 18
Slide 19: Our commitment to shareholders
Our commitment to shareholders Consistent vision and strategy Relentless focus on execution across the enterprise Disciplined investment decisions and thoughtful portfolio evaluation Delivering superior returns 19
Slide 20: Today's agenda
Advancing the Enterprise Driving Profitable Growth as a to Unlock Value Consumer Health Company Eva Boratto Karen Lynch Today’s Building the Most Consumer- Centric Health Company Evolving Strategy for a Changing Marketplace agenda Alan Lotvin, MD Derica Rice Establishing the Foundation Consumer Inno
Slide 21: Endnotes
Endnotes 1. Number of in-home visits includes visits by Coram, Aetna, and vendor nurses or other care team members to homes or other community settings. 2. Currently enacted laws and regulations were used in all the Company’s projections. 3. This financial measure is a non-GAAP financial measure. Fo
Slide 22: Advancing the Enterprise to Unlock Value
Advancing the Enterprise to Unlock Value Eva Boratto Executive Vice President & Chief Financial Officer
Slide 23: Continued focus on enhancing long-term shareholder value
Continued focus on enhancing long-term shareholder value Optimizing capital allocation Generating significant cash flow from operations Launching transformative products Sustainable long-term Steps of value creation growth to drive long-term growth 2
Slide 24: Agenda
Agenda 2019 guidance review Value creation through integration synergies, modernization & transformation Financial outlook & capital allocation strategy 3
Slide 25: Reaffirming all elements of 2019 guidance
Enterprise Outlook: 2019 full year1 Reaffirming all elements of 2019 guidance ($ in billions, except per share data) Consolidated Revenues $251.2 to $254.4 3 Adjusted Operating Income $15.0 to $15.2 GAAP Diluted EPS $4.90 to $5.05 3 Adjusted EPS $6.75 to $6.90 3 Cash Available to Repay Debt $4.2 to
Slide 26: Agenda
Agenda 2019 guidance review Value creation through integration synergies, modernization & transformation Financial outlook & capital allocation strategy 5
Slide 27: Executing on integration synergies to reach ~$900M run rate
1 1 . I N T E G R AT I O N S Y N E R G I E S Executing on integration synergies to reach ~$900M run rate ~$900M Business integration ~$800M Plan design Specialty / Coram / PBM Operations / Other General & administrative functions Vendor contracting $300-$350M Streamline corporate functions M
Slide 28: Generating net savings with enterprise modernization
2 . E N T E R P R I S E M O D E R N I Z AT I O N Generating net savings with enterprise modernization Areas of net savings • Technology modernization 1 $1.5B-$2.0B − Rationalization − Centers of excellence • Productivity improvements 1 − Optimize call centers $900M-$1.1B − Vendor management − Busine
Slide 29: Driving long-term value through transformation
3 . T R A N S F O R M AT I O N Driving long-term value through transformation Medical cost Membership Expanded use of Increased customer Open platform savings growth CVS assets satisfaction and and new retention businesses Commercial insured Plan sponsors Pharmacy Improving the Payor agnostic consum
Slide 30: Substantial long-term value creation through strategic initiatives
Substantial long-term value creation through strategic initiatives & consumer-centric products $1.5B - $2.0B ~$900M ~$850M Projected to drive a run rate of ~$3.5B in operating income in 20221 1. Integration 2. Enterprise 3. Transformation synergies modernization 9
Slide 31: Agenda
Agenda 2019 guidance review Value creation through integration synergies, modernization & transformation Financial outlook & capital allocation strategy 10
Slide 32: Balancing near-term execution with long-term vision
Balancing near-term execution with long- term vision 1 2 3 4 5 6 Mitigate Execute Focus on Refine and Optimize Enhance headwinds streamlining integration roll out new enterprise shareholder and expense process and front doors to portfolio and returns through reduction exceed synergy health care eval
Slide 33: Well positioned for long-term growth
Well positioned for long-term growth 2022+ Low double digits5 2021 Mid single digits 2020 Low single Projected Adjusted 2019 digits 2020P Key Elements1 EPS growth1,3,6 (%) $6.75 $7.00+ Adjusted EPS3,6 to 6.90 Revenue up low single digits % Tax rate ~ 28.5% 12
Slide 34: Health Care Benefits – 2020 year-over-year drivers
Health Care Benefits – 2020 year-over-year drivers Total Revenues1 Adjusted Operating Income1,3,4 Divestiture of Aetna PDP Competitive environment Health insurance fee reinstatement Divestiture of Aetna PDP and stranded costs Outpace industry growth in gov’t services Health insurance fee reinstateme
Slide 35: Retail / LTC – 2020 year-over-year drivers
Retail / LTC – 2020 year-over-year drivers Total Revenues1 Adjusted Operating Income1,3 Front store continued shift to digital Front store margin Front store formats & personalization Generics Omnicare Omnicare Outpace industry growth in Rx Reimbursement pressure Rx growth Synergies / enterprise mod
Slide 36: Pharmacy Services – 2020 year-over-year drivers
Pharmacy Services – 2020 year-over-year drivers Total Revenues1 Adjusted Operating Income1,3 Anthem Anthem Net new business / Centene migration Net new business / Centene migration Specialty Pricing pressure Purchasing economics Rebate guarantees Specialty Synergies / enterprise modernization 2020P
Slide 37: Investing in capabilities to drive sustainable long-term value
Investing in capabilities to drive sustainable long-term value $2.3B to $2.6B Annual projected capital expenditures1 Key areas of capital spending Historical Projected Remodels Innovative HealthHUB®s New stores Transformative products and modernization Technology Initiatives New stores Data analytic
Slide 38: Strong cash flow generation and effective capital deployment
Strong cash flow generation and effective capital deployment Plan to reduce debt significantly to reach leverage ratio target of low 3x’s Leverage Ratio1,3,7 ~4.7x at transaction close3 Focused on debt reduction in the near term • Committed to returning to low 3x’s leverage ratio target Mid ~3x • Si
Slide 39: Thoughtful capital allocation strategy to drive long-term value creation
Thoughtful capital allocation strategy to drive long-term value creation Near term (2020P-2021P)1 Debt Paydown ~45% Additional Retained ~10% Capital Needs ~25% of Insurance Capital Subsidiaries ~20% Deployment to Shareholders – Net Capital Dividends Only Expect $10B - $12B1,8 cash available annually
Slide 40: Long-term assumptions – 2022 and beyond
Long-term assumptions – 2022 and beyond1 Health Care Benefits Retail / LTC Pharmacy Services Other Commercial retention Generics Claims growth Capital deployment Competitive HealthHUB / Generics Impact of digital environment services growth Improvement Introduction of Membership growth Interest expe
Slide 41: Scorecard to evaluate success
Scorecard to evaluate success Target1 Timing $6.75 - $6.90 2019 $7.00+ (Low single digits%) 2020 Adjusted EPS Growth3 Mid single digits % 2021 Low double digits % 2022+ $300M - $350M 2019 Integration synergies ~ $800M 2020 ~ $900M 2021+ Enterprise modernization $1.5B - $2B Run Rate 2022 ~ $850M 2022
Slide 42: Steps to unlocking significant value well underway
K E Y TA K E AW AY S Steps to unlocking significant value well underway Strong progress executing our plan to grow and differentiate our businesses Significant upside to synergy targets Positioned for long-term enterprise growth Thoughtful allocation and prioritization of capital 21
Slide 43: Endnotes
Endnotes 1. Currently enacted laws and regulations were used in all the Company’s projections. 2. After income taxes, the Health Insurer Fee is projected to be a headwind for the Health Care Benefits segment. 3. This financial measure is a non-GAAP financial measure. For an explanation of this finan
Slide 44: Endnotes
Endnotes 7. The Company defines its leverage ratio as Adjusted Debt divided by adjusted earnings before interest, tax, depreciation and amortization (Adjusted EBITDA). Adjusted Debt is defined as short-term debt and total long-term debt (including the current portion of long-term debt), plus the pre
Slide 45: Building the Most Consumer-Centric Health Company
Building the Most Consumer-Centric Health Company Alan Lotvin, MD Executive Vice President & Chief Transformation Officer
Slide 46: A team with a diverse experience set
A team with a diverse experience set Quinby Squire to lead our company through a time of change Chief Financial Officer Bruce Culleton, MD Kidney Care Dave Edelman Chief Marketing Officer Dan Finke Transformation Products & Services Kari Holloway Kidney Care Betsy Ferguson Legal Megan Hall Strategy
Slide 47: Agenda
Agenda Strategy for accelerating growth Our differentiated consumer experience Product roadmap and value creation 3
Slide 48: A truly consumer-centric health company
A truly consumer-centric health company Be local Community-focused Within 3 miles of ~70% of US population Make it simple Technology-enabled Connecting physical and digital experiences Improve health Solving unmet needs to help achieve best health More than 30K health care professionals 4
Slide 49: Our community assets differentiate us
Our community assets differentiate us Consumers invite us into We are embedded in their Our stores are in their their homes digital lives, in their hands community – a local “hub” 5
Slide 50: We meet consumers where they are
We meet consumers where they are 6
Slide 51: We're reinventing local health care delivery
We’re reinventing local health care delivery with our community assets ONE EXAMPLE: MinuteClinic Legacy ® New services services in 2019 MinuteClinic® can MinuteClinic include: manage ~ 80% of the scope of typical • Sleep apnea Traditional primary care practice screening primary care Currently over 1
Slide 52: Transformational products and services
Transformational products and services Solve customers’ Accelerate in fastest biggest problems growing segments Deliver true Differentiate innovation legacy businesses 8
Slide 53: Our product and service portfolio targets the biggest challenges in health care
Our product and service portfolio targets the biggest challenges in health care Comprehensive New consumer facing chronic care and Risk carve-outs products disease management • 60% adults have chronic disease1 • $3T in spend in U.S.2 • $50B spent by Aetna clients3 Optimize government Home programs A
Slide 54: Agenda
Agenda Strategy for accelerating growth Our differentiated consumer experience Product roadmap and value creation 10
Slide 55: 360° member view
360° member view enables personalized engagement Complex chronic Identify consumer risk Common chronic stratification Healthy Personalized engagement • Coordinate care Impactful • Integrate member context interventions • Influence meaningful moments 11
Slide 56: Transforming the patient journey
JOSEPH Transforming the 48 years old patient journey • Has type-2 diabetes • Infrequently sees his primary care doctor • On medication Multiple community touchpoints • Demanding job Connecting physical and virtual SUSAN experience 62 years old Two-way data flows to • Has difficult-to-control high de
Slide 57: Joseph's Journey
JOSEPH’S JOURNEY Identified as needing an annual diabetes exam, Joseph is counseled while filling his prescription. Dietician Primary care provider Pharmacy Care manager MinuteClinic® 13
Slide 58: Joseph's Journey
JOSEPH’S JOURNEY MinuteClinic® administers annual diabetes exam. Need for additional support identified. Dietician Primary care provider Pharmacy Care manager MinuteClinic® 14
Slide 59: Joseph's Journey
JOSEPH’S JOURNEY Care manager visits Joseph at home and creates a care plan to keep him on track. Dietician Primary care provider Joseph’s care plan: Annual diabetic exam Medication reconciliation Pharmacy Care manager In home assessment Blood sugar testing Meet with dietician Follow up with special
Slide 60: Susan's Journey
SUSAN’S JOURNEY Analytics identify elevated risk. Care management contacts Susan. Modality clinic Primary care provider Home Nephrologist hemodialysis device Pharmacy Care manager Note: Home hemodialysis device still pending FDA approval 16
Slide 61: Susan's Journey
SUSAN’S JOURNEY Discusses options for future renal replacement therapy and makes a plan for future dialysis. Modality clinic Primary care provider Home Nephrologist hemodialysis device Pharmacy Care manager Note: Home hemodialysis device still pending FDA approval 17
Slide 62: Susan's Journey
SUSAN’S JOURNEY Starts home hemodialysis and is able to continue working. Modality clinic Primary care provider Home Nephrologist hemodialysis device Pharmacy Care manager Note: Home hemodialysis device still pending FDA approval 18
Slide 63: The CVS Health difference
The CVS Health difference Hub Hand Home Community touchpoints are our differentiator: Traditional engagement tools • Changing behavior by being a part of daily life Analytics Table • Improving outcomes associated Stakes with chronic disease Data 19
Slide 64: Agenda
Agenda Strategy for accelerating growth Our differentiated consumer experience Product roadmap and value creation 20
Slide 65: Our product and service portfolio targets the biggest challenges in health care
Our product and service portfolio targets the biggest challenges in health care Comprehensive New consumer facing chronic care and Risk carve-outs products disease management • Greenfield opportunity • $180B spend for oncology / • Substantial focus of health kidney disease5 care VCs • Major client p
Slide 66: How we'll create value across the enterprise
How we’ll create value across the enterprise Medical cost Membership Expanded use of Increased consumer Open platform savings growth CVS assets satisfaction and and new retention businesses Commercial insured Plan sponsors Pharmacy Improving the Payor agnostic consumer experience solutions Medicare
Slide 67: Transformation product timeline
Transformation product timeline 2019 2020 2021 2022+ Comprehensive chronic care and disease management New consumer facing products Optimize government programs Risk carve-outs Home hemodialysis Analytics products 23
Slide 68: The portfolio is projected to drive significant operating income
The portfolio is projected to drive significant operating income 2022 Long Term ~$850M in projected operating income for the enterprise10 ~$2.5B in projected operating income for the enterprise10 Insured medical cost savings ~$450M New Insured 55% businesses/ medical other 35% cost savings ~$1B 40%
Slide 69: Building the most consumer-centric health company
K E Y TA K E AW AY S Building the most consumer- centric health company Becoming the most consumer-centric health company Differentiating through our community touchpoints Building a balanced growth portfolio supporting all businesses Projecting ~$2.5B of operating income over the long term 25
Slide 70: Endnotes
Endnotes 1. 6 in 10 adults in the US have a chronic disease; Source: CDC 2. $3T in US spend on people with chronic and mental health conditions; Source: CDC 3. $50B in chronic care spend within Aetna membership in 2017 (includes insured and ASO); Source: Aetna 4. $6.3B in bonus payments from CMS for
Slide 71: Establishing the Foundation for Transformation
Establishing the Foundation for Transformation Jon Roberts Executive Vice President & Chief Operating Officer
Slide 72: Transforming our operations to enable long-term growth
Transforming our operations to enable long-term growth CVS + Aetna To capitalize on this opportunity, we will establish a new operational foundation Enhance our Optimize our Modernize our technology pharmacy enterprise to NEW OPPORTUNITY infrastructure to supply chain drive long-term Unmatched exper
Slide 73: Agenda
Agenda Consumer-centric, data-driven infrastructure Optimizing the pharmacy supply chain Enterprise modernization 3
Slide 74: Building a consumer-centric technology infrastructure
Building a consumer-centric technology infrastructure Three Key Areas Integrated data An intelligent and advanced engagement analytics platform Seamless, connected digital & physical experiences 4
Slide 75: Creating an integrated data ecosystem
Creating an integrated data ecosystem Creating a high-quality, reliable, protected and …to unlock the power of our data; integrated data platform for the enterprise… delivering value in new ways Increasing consumer engagement Enhancing business benefits Medicare Coram Driving new business Medicaid C
Slide 76: Applying advanced analytics, including machine learning and artificial intelligence
Applying advanced analytics, including machine learning and artificial intelligence Supporting our businesses Engaging consumers Next best action Revenue & Network & membership growth provider tools analytics that develop targeted engagement Consumer opportunities to influence Behavior consumer beha
Slide 77: Developing an intelligent engagement platform
Developing an intelligent engagement platform Understanding the consumer’s Consistent and connected journey and creating a outreach across various channels customized engagement strategy Continually updated 360° Personalized content view of consumer to management; the right topic, personalize produc
Slide 78: Turning data into insights and insights into action
Turning data into insights and insights into action AT-RISK JOSEPH AGE: Maintaining my health is my INCOME: first priority since learning I’m JOB: Employed at risk for complications DEVICES USED: Mobile phone associated with my diabetes. PREFERENCES: Appreciates proactive outreach as he balances wor
Slide 79: Building on our existing foundation, we are taking an agile and scalable approach
Building on our existing foundation, we are taking an agile and scalable approach Build on our Take a use case driven Start small, show Build for existing technology approach to build value, and iterate the enterprise modernize and guided by the needs of with a design that ensuring we maximize ratio
Slide 80: Agenda
Agenda Consumer-centric, data-driven technology Optimizing the pharmacy supply chain Enterprise modernization 10
Slide 81: Levers to optimize our pharmacy supply chain
Levers to optimize our pharmacy supply chain 1. Size, scale, 2. Traditional 3. Specialty & 4. Pharmacy & 5. Innovative and expertise generics biosimilars medical benefit contracting 11
Slide 82: Size, scale, and expertise
1. SIZE, SCALE, AND EXPERTISE 100+ $18.5 Million 3 Billion 2 Lives under Savings from Our advantages management across PBM and generics and biosimilars make us a Health Care Benefits (2016-2018) marketplace leader 2.7 $67 Billion 1 Billion 2 Enterprise Rebate value prescriptions delivered to clients
Slide 83: Red Oak continues to position us to win in traditional generics
2. TRADITIONAL GENERICS Red Oak continues to position us to win in the traditional generics marketplace New Capabilities • Increased data and analytics capabilities • Expanded ability to identify risks and opportunities across the global supply chain • Enhanced supplier assessment framework to deliv
Slide 84: Historic and potential future generic launches
2. TRADITIONAL GENERICS Historic and potential future generic launches Sales of branded products with recent and upcoming generic launches (excluding biosimilars)4 U.S. Sales ($ Billions) $30 $25 Abilify ($7.9B) Opportunity remains Future Opportunities: $20 Nexium ($6.0B) Crestor ($6.5B) beyond the
Slide 85: In Specialty, we will increase the use of biosimilars
3 . S P E C I A LT Y A N D B I O S I M I L A R S In Specialty, we will increase the use of biosimilars as approvals gain momentum Sales of branded products with recent and upcoming biosimilar launches5 U.S. Sales ($ Billions) $13.6 Humira Cost management opportunity improves when there is increased
Slide 86: Enterprise approach to reducing specialty drug costs
4. PHARMACY AND MEDICAL BENEFITS We will take an enterprise approach to reducing specialty drug costs under both the medical and pharmacy benefit Our combined capabilities create $280 more opportunities to: • Align incentives across stakeholders to increase competition in medical U.S. specialty $150
Slide 87: High-cost therapies present opportunities for innovative approaches
5 . I N N O VAT I V E C O N T R A C T I N G High-cost therapies present opportunities for innovative approaches Gene therapy Examples: Expensive Single-use agents $850K $2M+ $2-3M “Curative” Luxturna Zolgensma Valoctocogene Replace lifetime therapy inherited for spinal muscular atrophy Roxaparvovec
Slide 88: High-cost therapies present opportunities for innovative approaches
5 . I N N O VAT I V E C O N T R A C T I N G High-cost therapies present opportunities for innovative approaches Gene therapy12 Example (illustrative): Expensive Single-use agents $850K $2M+ $2-3M “Curative” Luxturna Zolgensma Valoctocogene Replace lifetime therapy inherited for spinal muscular atrop
Slide 89: Optimizing our pharmacy supply chain
Optimizing our pharmacy supply chain • Well positioned to drive value from traditional generics and biosimilars • CVS + Aetna combination provides additional levers to drive value in specialty pharmacy under the medical benefit • We will use our enterprise assets to continue to optimize our pharmacy
Slide 90: Agenda
Agenda Consumer-centric, data-driven technology Optimizing the pharmacy supply chain Enterprise modernization 20
Slide 91: Generating net savings with enterprise modernization
Generating net savings with enterprise modernization13 $1.5B to $2.0B Areas of net savings • Technology modernization − Rationalization − Centers of Excellence $900M-$1.1B • Productivity improvements − Optimize call centers − Vendor management $400M-$600M − Business initiatives Projected costs to ac
Slide 92: Major long-term value opportunities
Major long-term value opportunities will help us reach our strategic and financial aspirations Enterprise modernization Work smarter to deliver IT modernization substantial cost benefits Deliver unmatched Enterprise service consumer experience delivery center Build an innovative workplace and workfo
Slide 93: Example: Automating pharmacy benefit plan configuration
Example: Automating pharmacy benefit plan configuration14 Delivering faster, more accurate client Requirements Modeling Optical Character Analytics + benefits and better member experience Client Recognition + Machine Interface Natural Language Processing Learning 2,800+ clients Automated offering 1,
Slide 94: Example: Targeting significant reduction in call center cost
Example: Targeting significant reduction in call center cost while improving member experience 14 Goals Reduce call center >100M cost by >30% … Leverage Inbound calls received each year across PBM, technology Aetna, and Retail …while improving businesses member experience … Change >$1B behaviors Ann
Slide 95: Building a powerful operational foundation
K E Y TA K E AW AY S Building a powerful operational foundation At the center – a consumer-centric technology infrastructure with advanced analytics An optimized pharmacy supply chain – capitalizing on generics and biosimilars, and utilizing innovative contracting Multi-year Enterprise Modernization
Slide 96: Endnotes
Endnotes 1. https://www.cvshealth.com/about/facts-and-company-information, accessed May 19, 2019. 2. https://payorsolutions.cvshealth.com/sites/default/files/2018-trend-report.pdf (page 2), accessed May 19, 2019. 3. https://d18rn0p25nwr6d.cloudfront.net/CIK-0000064803/9cbbe02f-2553-4357-9633-fc0823f
Slide 97: Endnotes
Endnotes 10. https://www.consumerreports.org/drug-prices/kymriah-first-gene-therapy-costs-475000-dollars-childhood-cancer, accessed April 8, 2019. 11. https://www.pharmaceutical-technology.com/comment/asco-2018-will-jcar017-become-third-car-t-product-lymphoma/, accessed April 8, 2019. 12. Summary of
Slide 98: Driving Profitable Growth as a Consumer Health Company
Driving Profitable Growth as a Consumer Health Company Karen S. Lynch Executive Vice President & President, Aetna
Slide 99: Health Care Benefits (HCB) executive team
Health Care Benefits (HCB) executive team Dave Edelman Marketing Scott Walker Sheryl Burke Chief Financial Officer Commercial Business Tanya Taupier Human Resources Jonathan Mayhew Erin Hoeflinger Markets and Distribution Business Strategy & Strategy & Enablement Excellence and Louis Ursini Consumer
Slide 100: Agenda
Agenda Strategy Business Update • Medicare • Medicaid • Commercial & Supplemental 3
Slide 101: Health is personal
From Traditional insurance company Health is personal To Together, we will accelerate our Consumer journey to transform the health Health care experience company 4
Slide 102: Transformational change
Complementing our core with the development of new products and services Grow the core Build the new Multi-pronged approach to Innovative solutions and deliver growth across services to be delivered Transformational HCB businesses in the community change Expand geographic Create integrated footprint
Slide 103: Integrating capabilities to differentiate the health care experience
Integrating capabilities to differentiate the health care experience CVS AETNA MinuteClinic® bswift® Walk-in Clinics Shop/buy/enroll Aetna® Community Care Retail Pharmacies Local care teams Consumer-centric PayFlex® approach to Pay. Save. Invest. Coram Medical cost management Specialty infusion Cust
Slide 104: The combined advantage
The combined advantage MinuteClinic In-store Medicare Be local optimization knowledge centers Make it Holistic product “Hospital to Home”* simple integration Improve Pharmacy panels Digital triage* health *Future program launch 7
Slide 105: The future
The future 1. Evolving from health insurer to consumer health company 2. Delivering holistic care to our members 3. Transforming the industry with combined CVS Health / Aetna assets 8
Slide 106: Agenda
Agenda Strategy Business Update • Medicare • Medicaid • Commercial & Supplemental 9
Slide 107: Our business today - Medicare
Our business today - Medicare Medicare Advantage Enrollment 1.3M+ Individual members WA MT ND ME VT 21% CAGR (2015 – 1Q 2019) MN NH OR NY MA ID WI SD MI CT RI WY PA NJ IA 900K+ Group NV NE IL IN OH WV DE UT members CA CO KS MO KY VA 15% CAGR (2015 – 1Q 2019) TN NC OK SC AZ AR NM AL GA MS LA TX 6.0M+
Slide 108: A compelling landscape
A compelling landscape We have grown membership faster than CMS expects a continuation of the positive trends competitors and captured share in Medicare Advantage enrollment 80 1Q 2019 18% AET MA CAGR1,3 2015 70 60 2.2M ENROLLMENT (M) 1.3M MA Members MA Members 50 Rank: #5 Rank: #3 CMS FORECAST4 40
Slide 109: Capturing the opportunity
Capturing the opportunity Medicare Advantage Star Percentage of Medicare More than 82,000 PDP to Ratings Advantage beneficiaries with Medicare Advantage % of members in 4+ star-rated plans access to Aetna plans1 conversions 2015 - 2019 87% 91% 88% 79% 75% 79% 70% 73% 2015 45% 67% 60% 2016 49% 2017 5
Slide 110: Critical capabilities
Critical capabilities Local Market Consumer Care Delivery Analytics & Presence & Depth Experience Ecosystem Technology Deep understanding Focus on simplification, Value-based contracting 360° view of consumers of market dynamics and minimizing consumer with aligned incentives; and providers; local p
Slide 111: The combined advantage
The combined advantage “Hospital to Home” Making it simpler for our customers to improve their quality of life Expect to launch pilot in 4Q 2019 14
Slide 112: The future
The future 1. Continued above industry growth 2. Commitment to STARS excellence 3. Personalized care in the community and in the home 15
Slide 113: Agenda
Agenda Strategy Business Update • Medicare • Medicaid • Commercial & Supplemental 16
Slide 114: Our business today - Medicaid
Our business today - Medicaid Our Medicaid Presence 2M members NY in risk and non-risk MI agreements PA NJ OH IL MD WV VA KS KY CA Serving 16 state AZ partners across the nation TX LA FL Footprint State 17
Slide 115: Medicaid growth opportunity
Medicaid growth opportunity Medicaid Expenditures FFS $903 B Managed Care 6.3% Projected CAGR1,6 $539 B $552 B $589 B 40% 60% $513 B of Medicaid expenditure $460 B 48% 47% is expected to be 49% 53% serviced by managed 58% 60% care by 20256 52% 53% 47% 51% 42% 2014 2015 2016 2017P 2018P 2025P 18
Slide 116: We are delivering holistic health solutions
The opportunity to care for the more complex and higher acuity populations Physical Health We are delivering holistic health solutions for the Medicaid population that effectively respond to the social determinants of Starts Local health and solve for health inequalities Social Behavioral Economic H
Slide 117: Our approach to the marketplace
Our approach to the marketplace Be local Make it simple Improve health Lead the change Grow Medicaid Improve member and Drive higher quality and Deliver innovative through program provider experience plan performance solutions to evolve expansions, winning new to better serve our by improving qualit
Slide 118: The combined advantage
The combined advantage Expanded primary care services at MinuteClinic Improved access to care in the community Launching in 4Q 2019 21
Slide 119: The future
The future 1. Continuation of marketplace expansion 2. Capturing growth opportunities 3. Delivering improved access to care 22
Slide 120: Agenda
Agenda Strategy Business Update • Medicare • Medicaid • Commercial & Supplemental 23
Slide 121: Our business today - Commercial & Supplemental
Our business today - Commercial & Supplemental7 AK Commercial Medical Membership ~18M Commercial WA ME medical members MT ND MN VT NH projected for 20191 OR ID WI NY RI MA SD MI CT WY PA NJ IA NE OH MD DE NV IL IN UT WV CO VA Among the CA KS MO KY NC largest providers of AZ NM OK AR TN SC GA Dental
Slide 122: A mature landscape
A mature landscape Number of people enrolled in Percent of the U.S. population Expected commercial industry employer-sponsored enrolled in commercial revenue growth health care9 health care10 through 202211 Low single 156M 49% digit % Near-term Commercial medical membership and revenue expected to g
Slide 123: Critical capabilities
Critical capabilities Optimized value-based Service and clinical Growing supplemental care model models opportunities VBC related spend A1A membership Projected 2019 revenue1 >50% +600K ~$2.7B Digital enhancements 26
Slide 124: The combined advantage
The combined advantage Pharmacy panels Highly personalized pharmacist consultations Launched in 1Q 2019 27
Slide 125: The future
The future 1. Driving profitable growth 2. Delivering fully integrated offerings 3. Evolving with industry change 28
Slide 126: A redefined health care experience is within reach
K E Y TA K E AW AY S A redefined health care experience is within reach Ongoing progress on the journey to transform health care Uniquely positioned to drive growth in all lines of business Continued commitment to strategy, accelerated through the CVS Health combination 29
Slide 127: Endnotes
Endnotes 1. Currently enacted laws and regulations were used in all the Company’s projections. 2. February 2019 CMS Enrollment File; Kaiser Family Foundation 3. CVS Finance 4. CMS NHE Data, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalH
Slide 128: Evolving Strategy for a Changing Marketplace
Evolving Strategy for a Changing Marketplace Derica Rice Executive Vice President & President, CVS Caremark
Slide 129: Agenda
Agenda Leading PBM platform today and tomorrow Performance update Four pillars of strategic growth 2
Slide 130: Client and member value delivered
Client and member value delivered 2 2 2016 – 2018 In 2018 >$141B >$18.3B 44% ~2 out of every 3 Client pharmacy Client medical savings Clients saw their net Members spent savings from improved adherence Rx drug prices decline <$100 on Rxs Innovative solutions drive ongoing value and client satisfacti
Slide 131: Caremark continues to pioneer industry-leading approaches
Caremark continues to pioneer industry-leading approaches to transform healthcare Drug spend Operational Specialty Enterprise-wide management excellence outperformance innovation Formulary Seamless Scale / Maintenance Choice innovations on-boarding purchasing Specialty Connect Proven purchasing Medi
Slide 132: Agenda
Agenda Leading PBM platform today and tomorrow Performance update Four pillars of strategic growth 5
Slide 133: Strong fundamentals, transient challenges
Strong fundamentals, transient challenges Drivers / Challenges1 2018 2019 2020 2021 Net new contracts Centene carve-in Rebate guarantees Client pricing Improvement to COGS Specialty 6
Slide 134: 2020 selling season results year-to-date
2020 selling season results year-to-date 2020 Year-to-date Selling Season Revenue Impact1,3 (As of May 2019) +$3.2B ($3.8B) ($8.1B) ($8.7B) Gross Centene Other Net new business carve-in non-renewals new business Note: Anthem revenue recorded on a net basis vs. gross. 7
Slide 135: Agenda
Agenda Leading PBM platform today and tomorrow Performance update Four pillars of strategic growth 8
Slide 136: CVS Caremark is well positioned for growth
CVS Caremark is well positioned for growth 1. New economic 2. Enterprise 3. New best-in- 4. New open models Modernization class specialty platform solutions solutions Drug spend Operational Specialty Enterprise-wide management Excellence outperformance innovation 9
Slide 137: A full range of pricing model options for clients
1. NEW ECONOMIC MODELS Clients A full range of pricing model options Cost-Plus Traditional Guaranteed Risk-Based Net Cost for clients + Transparency, predictability, and low net cost Industry leading Real-time prescription Zero-copay Point-of-sale solutions benefit information chronic drug list reba
Slide 138: Aligning for Growth: Enhancing the member experience
2 . E N T E R P R I S E M O D E R N I Z AT I O N Aligning for Growth: Enhancing the member experience Member Proactive Real-time Best-in-class Clinical secure experience communications member self-service messaging improvements to providers information tools Expected Lower member Minimized Physician
Slide 139: CVS Health projected to outpace the industry in Specialty Rx growth
3 . S P E C I A LT Y S O L U T I O N S CVS Health projected to outpace the industry in Specialty Rx growth $28B $24B $19B $20B CVS Caremark Specialty Rx $13B 11% Managed CVS Specialty Rx $43B $32B $35B $37B Dispensed $27B CAGR Projected1,4 CVS Specialty Rx Dispensed 2015 2016 2017 2018 2019P 9% Spec
Slide 140: Delivering industry leading specialty results
3 . S P E C I A LT Y S O L U T I O N S 1,7 Delivering industry leading specialty results 1.7% 80% 5.3% 60M+ Specialty unit Patients More patients Novologix has highest price growth digitally optimally adherent adoption of any specialty management engaged with Secure Messaging medical solution 13
Slide 141: CVS Health continues to develop best-in-class specialty solutions
3 . S P E C I A LT Y S O L U T I O N S CVS Health continues to develop Innovative specialty solutions focused on: best-in-class specialty solutions Patient care to fuel growth • Provider and patient engagement and provider connectivity • EHR connectivity • Creating competition with formulary Drive a
Slide 142: CVS Caremark has successfully delivered programs and enterprise innovation
4 . N E W O P E N P L AT F O R M S O L U T I O N S 75+ 1,400+ CVS Caremark has Health Plan Employer clients clients successfully delivered programs and enterprise innovation to our clients and health care stakeholders8 90+ 94M Health Systems Consumers including provider CVS Caremark organizations me
Slide 143: Continuing to solve the biggest health care challenges
4 . N E W O P E N P L AT F O R M S O L U T I O N S Continuing to solve the biggest health care challenges for all of our stakeholders Transformation CVS Caremark open platform CVS Caremark solutions distribution channel Comprehensive chronic care and disease management New consumer facing products D
Slide 144: Comprehensive oncology solution matches patients with optimal treatment options
4 . N E W O P E N P L AT F O R M S O L U T I O N S Comprehensive oncology solution matches Oncology accounts for: patients with optimal treatment options 9 ~25% Align physician Enhance patient Improve of total specialty drug spend (medical and incentives experience care quality pharmacy benefit) 10
Slide 145: Well positioned for growth and innovation
K E Y TA K E AW AY S Well positioned for growth and innovation Leading PBM platform today and tomorrow Evolving strategy for a changing marketplace Four pillars of strategic growth: New economic models, enterprise modernization, best-in-class specialty solutions, open platform solutions 18
Slide 146: Endnotes
Endnotes 1. Currently enacted laws and regulations were used in all the Company’s projections. 2. CVS Health Enterprise Analytics; 2019. 2018 CVS Health Trend Report. Members are only utilizing members. 3. CVS Health Finance, Selling Season Report (YTD as of 5/24/2019) 4. Internal Specialty Finance;
Slide 147: Consumer Innovation Driving Profitable Growth
Consumer Innovation Driving Profitable Growth Kevin Hourican Executive Vice President & President, CVS Pharmacy
Slide 148: Agenda
Agenda Health of the business Retail growth strategy 2
Slide 149: Leadership in retail prescription growth driving increased share
Leadership in retail prescription growth driving increased share CVS Pharmacy Retail Share1,2 Growth* CVS Pharmacy Retail Share1,2* 12% 27% CVS Industry 26.3% 9.9% 26.2% 10% 26% 2019 8% 7.1% 25% 2018 6% 24.3% 24% 4% 3.6% 2.9% 2017 23% 2% 0% 22% 2018 Q1 2019 Mar Jun Sep Dec *90-day prescriptions coun
Slide 150: Prescription growth is 3x the industry
Prescription growth is 3x the industry Clinical Services and Innovative Networks and Initiatives Real Estate Industry leading adherence programs: Strong performance in Medicare Part D plans Saving Patients Money, ScriptPath, Multi-Dose Continued strength of real estate program Packaging ~55% of Q1 2
Slide 151: Driving profitable growth through health and beauty innovation
Driving profitable growth through health and beauty innovation Q1 2019 Front Store Revenue Health, Beauty, and Personal Growth by Category Care Revenue Growth3 Health 5.6% 4.6% 4.0% Beauty & Personal Care 3.2% 2.1% 1.8% Consumables & 2018 Q1 2019 -1.8% General Merchandise CVS Multi-Outlet Front stor
Slide 152: Topline strength offset by significant industry headwinds
Topline strength offset by significant industry headwinds Pharmacy Reduced benefits Shift of retail to reimbursement from generics digital channels pressure 6
Slide 153: Agenda
Agenda Health of the business Retail growth strategy 7
Slide 154: Retail strategy will help transform health care experience
Retail strategy will help transform health care experience Compelling place Investing in Customer- Differentiated to shop omnichannel focused service innovation experience Productivity improvements enable lower cost basis and increased profitability 8
Slide 155: CVS Pharmacy is uniquely positioned to win
CVS Pharmacy is uniquely positioned to win 1 2 3 4 Grow revenue Improve Change to value- Transform health faster than the productivity to fund based care experience industry future growth contracting Innovative clinical Automation and Align incentives and take Become the new front programs and front
Slide 156: Innovation driving front store growth
1. REVENUE GROWTH Innovation driving front store growth • Store Formats thousands of remodels, tailored assortments • Health and Wellness sick care and self care, hundreds of new items • Beauty 50 store remodels in 2019, new brands and services • Personalized Engagement ExtraCare® powered by machine
Slide 157: Innovation driving pharmacy growth
11. R E V E N U E G R O W T H Innovation driving pharmacy growth • Clinical Services Health data and advanced analytics driving personalized engagement • Saving Patients Money Proprietary Rx Savings Finder • ScriptPathTM Proprietary prescription label and medication dosing schedule • Multi-Dose Pack
Slide 158: Advancing convenience via omnichannel touchpoints
1. REVENUE GROWTH Advancing convenience via omnichannel touchpoints to enhance the reach of our 9,900+ retail locations MinuteClinic® CVS Pharmacy Walk-in Clinics Saving Patients Money MinuteClinic® CVS Pharmacy Telehealth Mobile App CVS Pharmacy CVS Pharmacy Delivery Rx + Front Rx Text Messages CVS
Slide 159: Enterprise modernization will enable profitable growth
2. PRODUCTIVITY IMPROVEMENT Enterprise modernization will enable profitable growth Pharmacy Real Estate Pharmacy Front Store Inventory Optimization Fulfillment Operating Model Efficiency 13
Slide 160: CVS Pharmacy will lead change in pharmacy contracting
33. V A L U E - B A S E D C O N T R A C T I N G CVS Pharmacy will lead change in pharmacy contracting to include more value-based collaborations Our growing, industry …and best-in-class …position us to partner in leading reach… adherence rates… value-based contracts • Value tied to outcomes 26% 82%
Slide 161: Transforming the consumer health experience starts with HealthHUB
44. T R A N S F O R M A T I O N Transforming the consumer health experience starts with HealthHUB® Complex chronic Risk Common chronic stratification Healthy Enables Personalized engagement • Coordinate care Impactful • Be local interventions • Integrate member context • Influence meaningful moments
Slide 162: HealthHUB designed to meet consumer needs
44. T R A N S F O R M A T I O N HealthHUB® designed to meet consumer needs – from sick care to self care • New Front Store Products • New Health Services • Advanced Pharmacy Care 16
Slide 163: HealthHUBs are improving the customer experience
4 . T R A N S F O R M AT I O N HealthHUBs® are improving the customer experience HealthHUBs® vs. Chain5 Customer Feedback:6 Products and Services HUBs Chain 84.9% “Great new renovations and many 79.5% 81.1% new brands of product 75.3% 76.3% – especially vitamins.” – Store #285 66.4% “Excited about d
Slide 164: HealthHUB expansion plans
4 . T R A N S F O R M AT I O N HealthHUB® expansion plans Four Metropolitan Areas in 2019 Houston, Philadelphia / Southern New Jersey, Atlanta, Tampa Nationwide coverage by end of 2021 ~1,500 retail locations 18
Slide 165: Improving health in the community
Improving health in the community Nurse practitioner Diabetes intervention6,7 • Abdominal pain • A1C > 12% • Not testing blood sugar • Multiple gaps in medication therapy • Severe retinopathy 19
Slide 166: Improving health in the community
Improving health in the community Care concierge Hypertension intervention6,7 • Concierge engages customer in the self care aisle • Conversation results in a BP reading via onsite machine • 200/120 BP results in immediate Minute Clinic visit • Gaps in care closed and prescriptions dispensed • Linkag
Slide 167: Retail strategy to deliver profitable growth
K E Y TA K E AW AY S Retail strategy to deliver profitable growth Lead industry in consumer-based innovation that drives outsized revenue growth in pharmacy and front store Increase automation to streamline work flows and enable differentiated customer service experience Collaborate with payors to a
Slide 168: Endnotes
Endnotes 1. CVS Health Retail Prescription Growth excluding LTC 2. IQVIA (data reflects Jan 2017 IQVIA methodology change) 3. Multi-Outlet growth based on dollar volume from all retail outlets in the Food, Drug, Mass, Dollar, Club, and Military channels that provide POS data to Information Resource
Slide 169: Reconciliation of Non-GAAP Items: 2019 Guidance
CVS Health Investor Day 2019 Reconciliation of Non-GAAP Items Required by SEC Rules A reconciliation of non-GAAP items disclosed for the respective periods to the most directly comparable GAAP measure. 2019 GUIDANCE The following reconciliations contain forward-looking information. By its nature, al
Slide 170: Reconciliation of Non-GAAP Items: Full-Year
CVS Health Investor Day 2019 Reconciliation of Non-GAAP Items Required by SEC Rules A reconciliation of non-GAAP items disclosed for the respective periods to the most directly comparable GAAP measure. FULL-YEAR 2019 Year Ending December 31, 2019P 2018 Low High Actual Per Per Per Total Common Total
Slide 171: Reconciliation of Non-GAAP Items: Adjusted Operating Income
CVS Health Investor Day 2019 Reconciliation of Non-GAAP Items Required by SEC Rules A reconciliation of non-GAAP items disclosed for the respective periods to the most directly comparable GAAP measure. ADJUSTED OPERATING INCOME The Company defines adjusted operating income as operating income (GAAP
Slide 172: Reconciliation of Non-GAAP Items: Cash Available for Debt Repayment
CVS Health Investor Day 2019 Reconciliation of Non-GAAP Items Required by SEC Rules A reconciliation of non-GAAP items disclosed for the respective periods to the most directly comparable GAAP measure. CASH AVAILABLE FOR DEBT REPAYMENT The Company defines cash available for debt repayment as net cas
Slide 173: Reconciliation of Non-GAAP Items: Adjusted EBITDA
CVS Health Investor Day 2019 Reconciliation of Non-GAAP Items Required by SEC Rules A reconciliation of non-GAAP items disclosed for the respective periods to the most directly comparable GAAP measure. Adjusted EBITDA in millions Net income (GAAP measure) (1) $ 5,581 Income tax provision (1) 1,624 I
Slide 174: Reconciliation of Non-GAAP Items: Implied Interest
CVS Health Investor Day 2019 Reconciliation of Non-GAAP Items Required by SEC Rules A reconciliation of non-GAAP items disclosed for the respective periods to the most directly comparable GAAP measure. B. Summary of the future minimum lease payments under operating leases as of December 31, 2017: Op