Cvs Health Corporation · NYSE:CVS
Cvs Health — Investor Day (December 2016)
42 slides from Cvs Health's investor day presentation, Dec 15, 2016
Slide 1: Delivering Value for All Health Care Stakeholders
Delivering Value for All Health Care Stakeholders Larry Merlo President & Chief Executive Officer
Slide 2: Agenda
Agenda Our Value Proposition Has Never Been Stronger We See Compelling Opportunities in a Robust Health Care Market How We’ll Drive Long-Term Enterprise Growth 2
Slide 3: 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 3
Slide 4: Our Integrated Model Drives More Affordable, Accessible and Effective Care
Our Integrated Model Drives More Affordable, Accessible and Effective Care Proprietary Programs Appropriate Utilization, Better Outcomes Maintenance Choice Higher penetration rates of programs, Specialty Connect resulting in better outcomes Pharmacy Advisor Health Engagement Engine Full View of Pati
Slide 5: Traditional Competitor Touchpoints Are Limited (Retail Pharmacy)
Traditional Competitor Touchpoints Are Limited Retail Pharmacy Competitors Health Providers Patients Senior Employers Government Health Systems Living Plans 5
Slide 6: Traditional Competitor Touchpoints Are Limited (PBM)
Traditional Competitor Touchpoints Are Limited PBM Competitors Health Providers Patients Senior Employers Government Health Systems Living Plans 6
Slide 7: Our Suite of Assets Provides Touchpoints Across All Health Care Stakeholders
Our Suite of Assets Provides Touchpoints Across All Health Care Stakeholders Health Providers Patients Senior Employers Government Health Systems Living Plans 7
Slide 8: Our Competitive Advantage
Our Competitive Advantage: Premier company with the ability to impact patients, payors and providers with innovative, channel-agnostic solutions Deep clinical expertise and insights enable us to help deliver superior outcomes at a lower cost Unmatched CVS Pharmacy value proposition for all payors Br
Slide 9: Continued Selling Season Success
Continued Selling Season Success … More than $40 billion in gross wins over past five years, with client retention of 96% to 97% 9 Refer to endnotes for additional information.
Slide 10: Fueling Growth in PBM Lives and Enterprise Volume
…Fueling Growth in PBM Lives and Enterprise Volume PBM Lives Under Management Enterprise Rx Volume (millions) (Rx dispensed, millions) 89 1,360 1,380 80 1,170 72 68 1,045 1,075 62 2013 2014 2015 2016E 2017E 2013 2014 2015 2016E 2017E 10 Refer to endnotes for additional information.
Slide 11: Agenda
Agenda Our Value Proposition Has Never Been Stronger We See Compelling Opportunities in a Robust Health Care Market How We’ll Drive Long-Term Enterprise Growth 11
Slide 12: We See Compelling Opportunities in a Robust Health Care Market
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of D
Slide 13: Growth in Health Care and Pharmacy Spend Projected to Outpace GDP Growth
TREND MANAGEMENT Growth in Health Care and Pharmacy Spend Projected to Outpace GDP Growth Annual Growth Rate Drivers of Trend (%, 2015-2025) • Increased utilization 6.7% − Growing prevalence of chronic disease 5.8% 4.5% • Rising prescription costs − Growth in specialty − Drug price inflation Gross H
Slide 14: Clients Continue to Value PBMs as an Indispensable Solution to Rising Costs
TREND MANAGEMENT Clients Continue to Value PBMs as an Indispensable Solution to Rising Costs Clients’ Top Rated Cost Control Methods Pharmacy Management Techniques 68% Increased Employee Cost-Sharing 34% Initiatives to Improve Well-Being 34% Full Replacement CDHP 31% Disease/Condition Management 30%
Slide 15: Suite of Capabilities Improving Health Care Affordability
TREND MANAGEMENT Suite of Capabilities Improving Health Care Affordability Cost Management Solutions Utilization Site-Of-Care Management Management Cost management solutions have lowered client Formulary Medical Claims Management Editing trend to 3.3% Network Real-Time Strategies Surveilla
Slide 16: Mitigated Branded Price Increases With Cost Management Solutions
TREND MANAGEMENT Mitigated Branded Price Increases With Cost Management Solutions Branded Rx Price Growth (total market, IMS Health) 14.3% 11.5% 12.4% 9.3% 10.0% 8.7% 9.1% 4.9% 5.1% 2.8% 2011 2012 2013 2014 2015 Gross Net 16 Refer to endnotes for additional information.
Slide 17: We See Compelling Opportunities in a Robust Health Care Market
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of D
Slide 18: Government Accounts for Two-Thirds of Health Insurance Spending
GOVERNMENT Government Accounts for Two-Thirds of Health Insurance Spending Government Health Insurance Spend ($, trillions) Key Drivers 2.9 • Growth in government programs 2.1 − Medicare 1.6 − Medicaid • These businesses are lower margin, but have higher utilization 2015 2020E 2025E % of insurance 6
Slide 19: Demand for Cost-Effective Care Will Remain Despite Uncertainty Around Health Care Reform
GOVERNMENT Demand for Cost-Effective Care Will Remain Despite Uncertainty Around Health Care Reform U.S. Uninsured Rate Future Outlook 14.3% • Many unknowns around repeal and replace 11.2% • Some ACA policies could remain, while others could change 8.3% • Need for coverage expected to remain 2012 20
Slide 20: CVS Health Well-Positioned to Capitalize on Growth in Medicare
GOVERNMENT CVS Health Well-Positioned to Capitalize on Growth in Medicare Medicare Enrollment CVS Health Advantages (lives, millions) • CVS Caremark: 12 million total 71.6 Med D members 62.6 54.0 − SilverScript is the largest PDP with 5.6 million members − Also support Med D/MAPD offerings of more t
Slide 21: We See Compelling Opportunities in a Robust Health Care Market
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of D
Slide 22: Movement Towards Value-Based Care Creates Need for New Cost Management Solutions
VALUE-BASED CARE Movement Towards Value-Based Care Creates Need for New Cost Management Solutions Provider Reimbursements Tied to Value ~60% Despite the anticipated shift of reimbursement to value- 45% based payments, only 26% of providers are currently meeting their goals to lower health care costs
Slide 23: Multitude of Ways We Provide Cost-Effective Care
VALUE-BASED CARE Multitude of Ways We Provide Cost-Effective Care Unique integrated programs, 90-day programs, formulary Pharmacy Care designs and value-based contracting Providing health care services, including wellness and MinuteClinic chronic care support Home or alternate-site infusion services
Slide 24: We See Compelling Opportunities in a Robust Health Care Market
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of D
Slide 25: Unsurpassed Procurement Scale Through Enterprise Dispensing Volume
SIZE AND SCALE Unsurpassed Procurement Scale Through Enterprise Dispensing Volume 2016 Estimated Rx Volume CVS Health Advantages (Rx dispensed, millions) Unsurpassed scale and expertise 1,360 allows us to be an efficient purchaser of pharmaceuticals Walgreens 930 Procurement scale further Express Sc
Slide 26: Ability to Aggregate Claims Volume Creates Value for Clients
SIZE AND SCALE Ability to Aggregate Claims Volume Creates Value for Clients 2016 Estimated Claims Volume (Rx managed, millions) CVS Health Advantages Managed claims volume supports negotiations for: 1,385 − Rebates − Price protection Express Scripts 1,275 − Formulary placement OptumRx 1,000 More tha
Slide 27: We See Compelling Opportunities in a Robust Health Care Market
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of D
Slide 28: Consumer-Directed Health Plans Gaining Traction
RETAILIZATION OF HEALTH CARE Consumer-Directed Health Plans Gaining Traction CDHP Prevalence (% of large employers) Drivers of Trend • Employers looking to better control rising 92% health care costs 84% • Health insurance shoppers on public exchanges choosing CDHPs 62% • Seek new, trusted health ca
Slide 29: We Own the Last Mile of Care Through Our Unmatched Patient Touchpoints
RETAILIZATION OF HEALTH CARE We Own the Last Mile of Care Through Our Unmatched Patient Touchpoints Specialty Retail Clinics Mail Long-Term Care Retail Pharmacy Infusion No matter the road, we can shape behavior and drive outcomes 29
Slide 30: We See Compelling Opportunities in a Robust Health Care Market
We See Compelling Opportunities in a Robust Health Care Market 1 Focus on Trend Management 2 Evolving Role of Government in Health Care 3 Movement to Value-Based Care Slow, But Inevitable 4 Ongoing Benefits of Size and Scale 5 Increasing Consumerism / Retailization of Health Care 6 Growing Role of D
Slide 31: CVS Health Digital Strategy Focused on Three Pillars
DIGITAL CVS Health Digital Strategy Focused on Three Pillars Integrated CVS Health Ongoing Adoption Experience Innovation • Attract new users • Core pharmacy • Mobile engagement • Increase engagement • Specialty • Data & personalization of active digital users • Long-term care • Digital health • Omn
Slide 32: Agenda
Agenda Our Value Proposition Has Never Been Stronger We See Compelling Opportunities in a Robust Health Care Market How We’ll Drive Long-Term Enterprise Growth 32
Slide 33: Our Strategic Business Imperatives
Our Strategic Business Imperatives Aggregate Grow Execute Drive Enterprise Lives Share With Innovation Focus Excellence Actions to achieve growth may change, strategic imperatives remain 33
Slide 34: Actions to Capitalize on Market Dynamics
Actions to Capitalize on Market Dynamics New, Enterprise Innovative Streamlining PBM Products Initiative Partner Sustainable Return More Enterprise Value to Broadly Growth Shareholders 34
Slide 35: Partner More Broadly
Actions to Capitalize on Market Dynamics Partner More Broadly Key Actions New, Enterprise Innovative Streamlining • Utilize full suite of enterprise PBM Products Initiative capabilities to enhance CVS Pharmacy value proposition – Bundled service offerings – Will make us partner of choice • Clinical
Slide 36: New, Innovative PBM Products
Actions to Capitalize on Market Dynamics New, Innovative PBM Products Key Actions New, Enterprise Innovative Streamlining • Clinical solutions to support all PBM Products Initiative stages of care • Value-based contracting approaches • New retail network strategies, including performance-based Partn
Slide 37: Enterprise Streamlining Initiative
Actions to Capitalize on Market Dynamics Enterprise Streamlining Initiative Key Actions New, Enterprise Innovative Streamlining • Further improve productivity to PBM Products Initiative solidify low cost provider status • Three broad areas of focus: – Store rationalization – Enhance efficiency of co
Slide 38: Return Value to Shareholders
Actions to Capitalize on Market Dynamics Return Value to Shareholders Key Actions New, Enterprise Innovative Streamlining • Optimize use of capital to drive PBM Products Initiative shareholder returns • Continue to evaluate strategic opportunities to drive long-term growth Partner Return • Annual di
Slide 39: Today's Key Takeaways
Today’s Key Takeaways Driving More Affordable, Accessible and Effective Care Driving Outcomes In an era of rising costs, we are the optimal partner to deliver savings and Savings and help improve outcomes for health care stakeholders Providing the Front Pharmacy has the highest frequency of interact
Slide 40: Endnotes
Endnotes Slide 9 1. As of December 2, 2016. 2. Gross new business revenues exclude Medicare Part D SilverScript individual products. 3. Client retention rate is defined as: 1 less (estimated lost revenues from any known terminations in that selling season year plus annualization of any mid-year term
Slide 41: Endnotes
Endnotes Slide 15 1. Source: CVS Health internal data analysis. 2. Utilization trend based on internal commercial cohort (Health Plans and Employers). 3. Trend is reported net of rebates. Slide 16 1. Source: IMS Institute for Healthcare Informatics, Medicines Use and Spending in the U.S., Chart 3. S
Slide 42: Endnotes
Endnotes Slide 25 1. Enterprise dispensed Rx include prescriptions filled at CVS Pharmacy, mail order and specialty prescriptions filled at CVS Caremark, and prescriptions filled by our long-term care pharmacies. 2. All dispensed CVS retail and mail prescriptions include the adjustment to convert 90