CVS CEO: We’re Still Eyeing Primary Care M&A

The leaders of CVS Health Corp. say they’ll keep shopping for a primary care business to help them build out their health care delivery portfolio.

Rhode Island-based CVS, which expects to close on its roughly $8 billion acquisition of home health player Signify Health Inc. in the first half of next year, has been linked to a number of possible deals recently but nothing has materialized on that front yet. But President and CEO Karen Lynch told analysts after the company reported third-quarter results that the strategy centered on primary services expansion into areas such as care coordination and mental health remains a priority.

“We will continue to evaluate our options on primary care,” Lynch said. “We believe that we need to do M&A and we continue to evaluate those options in the marketplace.”

Lynch and her team this summer won the fight for Signify over a field that reportedly included Amazon and UnitedHealth and also has, along with Humana Inc., been said to have held talks with Cano Health Inc. Lynch and CFO Shawn Guertin told analysts on a conference call that they have the ability to both pull off a large acquisition and have enough cash left to buy back shares to help the company hit its longer-term earnings-per-share goals.

While they hunt for deals, Lynch said CVS leaders also are building out their offerings internally, investing in the company’s clinics and retail stores as well as developing products incorporating its Aetna insurance division. In addition, Optum and HealthCare Partners veteran Amar Desai a few weeks ago started his work as the company’s first president of health care delivery and will look to guide its strategy.

In the three months ended Sept. 30, CVS posted a net loss of more than $3.4 billion because it booked a $5.2 billion charge to settle opioid-related lawsuits and another $2.5 billion to write down the value of the Omnicare long-term care pharmacy business it bought in 2015 and is now looking to sell. Adjusted for those and other one-time items, adjusted operating profits rose 4% from the third quarter of 2021. Revenues climbed 10 percent from a year earlier to nearly $81.2 billion.

Also discussed in the company’s earnings report and on its conference call were two disappointments that will combine to impact CVS’ business by $2 billion in 2024. The company’s Medicare Advantage Star rating was recently cut to 3.5 from and its Centene Corp. has decided to move its large pharmacy benefit management contract to Cigna Corp.’s Express Scripts subsidiary.

Lynch sought to put a silver lining on those items by saying her team has the “right actions in place” to improve its MA quality rating and that, while the Centene loss stings, CVS’ pharmacy services sales group has recently won $3.5 billion of new business for 2023.

Shares of CVS (Ticker: CVS) rose more than 2 percent to $96.80 Nov. 2, staying in the green on a day when markets swooned late after Federal Reserve Chairman Jay Powell said it is too early for the central bank to let down its guard on inflation. Over the past six months, the stock is essentially flat, leaving the company’s market capitalization about $127 billion.