WOONSOCKET, R.I. — CVS Health beat Wall Street's forecast for first quarter revenue and earnings, as its insurance business rebounded from its struggles of several recent quarters.
CVS said it would discontinue operations in 2026 in the individual health insurance exchanges set up under the Affordable Care Act. "This decision is consistent with others taken this year to focus the company's portfolio," it said.
It also announced that CVS Caremark has partnered with Novo Nordisk to ease access to the latter's popular GLP-1 drug Wegovy.
Bill Schiffner
CVS's first-quarter revenue of $94.59 billion topped analysts' expectation of $93.64 billion, while adjusted earnings per share of $2.25 were well above the predicted $1.70 per share.
“As we aim to be the most trusted health care company in America, we are driving greater care, value, and service from our integrated, industry-leading businesses," said president and CEO David Joyner. "Thanks to a resolute focus on customers, our colleagues across CVS Health delivered positive results across our Health Care Benefits, Health Services and Pharmacy & Consumer Wellness segments, as we continue to build a world of better health around the 185 million consumers we are privileged to serve.”
The company raised its full-year adjusted EPS guidance range to $6.00 to $6.20 from $5.75 to $6.00, and boosted its cash flow from operations guidance to approximately $7.0 billion from approximately $6.5 billion. It did not forecast revenue, saying it was "maintaining a cautious view for the remainder of the year in light of continued elevated cost trends and the potential for macro headwinds."
Total revenues for the quarter ended March 31 increased 7.0%, driven by revenue growth across all segments.
Operating income was $3.37 billion, up 49% from the year-ago period, primarily due to increased adjusted operating income and the absence of a $100 million opioid litigation charge recorded in the prior year. These increases were partially offset by a $387 million litigation charge related to a jury verdict against Omnicare and a $247 million pre-tax loss on the wind down and sale of accountable care assets.
Adjusted operating income was $4.58 billion, up 55% as a result of increases across all operating segments.
GAAP diluted EPS of $1.41 increased from $0.88 in the prior year and adjusted EPS of $2.25 increased from $1.31 in the prior year, primarily due to an increase in the Health Care Benefits segment's operating results, which reflects favorable year-over-year impact of prior-year development and improved underlying performance in Medicare, including the impact of improved Medicare Advantage star ratings for the 2025 payment year.
Net income rose 59% to $1.78 billion.
Interest expense increased $69 million, or 9.6%, due to higher debt, primarily as a result of long-term debt issued in May and December of 2024.
The effective income tax rate increased to 31.9% compared to 28.9%, primarily due to the impact of a litigation charge.
Health Care Benefits segment
- Total revenues increased 8.0% for the three months ended March 31, 2025 compared to the prior year primarily driven by increases in the Medicare product line, including the impact of improved Medicare Advantage star ratings for the 2025 payment year.
- Adjusted operating income increased $1.3 billion for the three months ended March 31, 2025 compared to the prior year primarily driven by the favorable year-over-year impact of prior-year development, as well as improved underlying performance in Medicare, including the impact of improved Medicare Advantage star ratings for the 2025 payment year. These increases were partially offset by the premium deficiency reserve described below.
- During the first quarter of 2025, the company recorded a premium deficiency reserve of $448 million within its individual exchange product line related to anticipated losses for the 2025 coverage year. The $448 million premium deficiency recorded was comprised of $17 million of operating expenses related to the write-off of unamortized acquisition costs and $431 million of health care costs.
- The MBR decreased to 87.3% in the three months ended March 31, 2025 compared to 90.4% in the prior year driven by the favorable year-over-year impact of prior-year development, as well as improved underlying performance in Medicare, including the impact of improved Medicare Advantage star ratings for the 2025 payment year. These decreases were partially offset by the $431 million (130 basis points) premium deficiency reserve recorded as health care costs described above.
- Medical membership as of March 31, 2025 of 27.1 million remained relatively consistent compared with December 31, 2024, reflecting membership declines in the individual exchange and Medicare product lines, which were largely offset by an increase in Commercial ASC membership.
- Prior years' health care costs payable estimates developed favorably by $1.6 billion during the three months ended March 31, 2025. This development is reported on a basis consistent with the prior years' development reported in the health care costs payable table in the company's annual audited financial statements and does not directly correspond to an increase in 2025 operating results.
- Days claims payable were 43.2 days as of March 31, 2025, a decrease of 0.8 days compared to December 31, 2024. The decrease was primarily driven by pharmacy costs, partially offset by the impact of the premium deficiency reserve recorded as health care costs in the first quarter of 2025 described above.
- Aetna has introduced an approach to bundling approvals for prior authorizations for certain cancer-related scans and tests, making it one upfront approval instead of multiple approvals over a period of months. In addition, a new Aetna Clinical Collaboration program partners with hospitals to support members as they change care settings, reducing readmissions and improving outcomes.
Health Services segment
- Total revenues increased 7.9% for the three months ended March 31, 2025 compared to the prior year primarily driven by pharmacy drug mix, growth in specialty pharmacy and brand inflation. These increases were partially offset by continued pharmacy client price improvements.
- Adjusted operating income increased 17.6% for the three months ended March 31, 2025 compared to the prior year primarily driven by improved purchasing economics and pharmacy drug mix. These increases were partially offset by continued pharmacy client price improvements.
- Pharmacy claims processed remained relatively consistent on a 30-day equivalent basis for the three months ended March 31, 2025 compared to the prior year primarily driven by increased utilization, largely offset by the impact of an additional day in 2024 due to the leap year.
- CVS Caremark is partnering with Novo Nordisk to significantly increase access to Wegovy, a GLP-1 drug, for its members at a more affordable price. The Company is taking a formulary action on July 1, 2025 to prefer Wegovy for its members. The Company will enhance the value of these new medications by combining them with additional lifestyle clinical support as part of the CVS Weight Management program offered to clients through CVS Caremark.
Pharmacy & Consumer Wellness segment
- Total revenues increased 11.1% for the three months ended March 31, 2025 compared to the prior year primarily driven by pharmacy drug mix and increased prescription volume. These increases were partially offset by continued pharmacy reimbursement pressure.
- Adjusted operating income increased 11.6% for the three months ended March 31, 2025 compared to the prior year primarily driven by increased prescription volume and improved drug purchasing. These increases were partially offset by continued pharmacy reimbursement pressure and the impact of softening consumer demand in the front store in the three months ended March 31, 2025.
- Prescriptions filled increased 4.3% on a 30-day equivalent basis for the three months ended March 31, 2025 compared to the prior year primarily driven by increased utilization, partially offset by the impact of an additional day in 2024 due to the leap year.
- Same store prescription volume(6)(12) increased 6.7% on a 30-day equivalent basis for the three months ended March 31, 2025 compared to the prior year.
- CVS Pharmacy is the first retail pharmacy in the NovoCare pharmacy network. This will enable CVS Pharmacy to provide convenient, safe and affordable access to Wegovy for eligible patients at its more than 9,000 community health locations across the country.
